Euro, shares gain on Spanish banks, stimulus hopes

LONDON (Reuters) - The uncertain worldwide growth outlook flushed more investors out of riskier assets on Monday, sending shares and commodities down, despite signs that a drive by Europe's leaders to tackle the region's debt crisis was gathering momentum.

The euro slid 0.2 percent to $1.2430, though it was trading well above the $1.2288 it hit on Friday, its lowest level since July 2010, while Brent crude oil fell below $97 a barrel to a 16-month low.

But safe-haven German government bond yields also rose from last week's record lows as some investors looked to take profits on the sharp moves of the past week, with low liquidity due to a UK market holiday exacerbating price swings.

"Investors are just fleeing risk assets," said ATI Asset Management chief investment officer Simon Burge.

The latest sell-off followed disappointing U.S. jobs growth figures on Friday and weak Chinese manufacturing data, which stoked fears that deepening problems in the euro zone are causing a global slowdown in business activity.

Those fears caused sharp falls across Asian markets on Monday, dragging Tokyo's Topix index <.TOPX> to a 28-year low, and followed a fall of more than 2 percent in U.S. stocks on Friday. U.S. stock index futures also pointed to a lower open on Wall Street on Monday <.N>.

The MSCI world equity index <.MIWD00000PUS> was down 0.5 percent at 290.58 points, and is back at levels last reached in December before a wave of coordinated central bank intervention sparked a recovery.

In thin European markets, the FTSE Eurofirst 300 <.FTEU3> index of top shares was down 0.1 percent at 953.94 points after hitting a six-month low on Friday, while the blue chip EuroSTOXX 50 <.STOXX50E> was down 0.9 percent at 2,086.62 points.

Investors are waiting to see if policy meetings by the European Central Bank (ECB) and the Bank of England this week will produce any sign that another wave of easing is likely given the weaker-than-expected economic data.

Figures on Monday showing euro zone factory prices were unexpectedly stable in April from March, the fourth straight month of weakening inflation pressures, offered some hope that ECB could cut rates.

"Everybody is now waiting for what decision the ECB will take on Wednesday and what (U.S. Federal Reserve Chairman Ben) Bernanke will announce on Thursday. There are strong expectations that something will happen, otherwise the market will go much further down," said Francois Duhen, strategist at CM-CIC Securities.

However, the latest Reuters survey of economists' expectations, taken before the latest U.S. jobs data, showed only a third of economists - 27 out of 73 - say the ECB will cut interest rates before the end of the year, and only 11 expect it to move at this week's meeting.

"Without any political or monetary intervention, markets are left in a vacuum," said Stewart Richardson, chief investment officer at RMG Wealth Management.

"The potential for a market capitulation in this period is high, and if we are correct in this view, we fully expect coordinated money printing from the major central banks towards the end of June," he said.

EUROPEAN MASTERPLAN

Europe's leaders are trying to ease market concerns by speaking out about moves to greater fiscal integration before their summit at the end of the month, and before a G20 group of nations meeting on June 18 and 19.

German Chancellor Angela Merkel has been pressing for a central authority to manage euro area finances, and also wants a coordinated approach to reforming labor markets, social security systems and tax policies.

Spain, which is struggling to shore up its banking system, signaled over the weekend that it was on board with a key element of the plan.

Spanish Prime Minister Mariano Rajoy called for the establishment of a central authority that would oversee and coordinate national budgets in the euro zone.

Spain will provide a big test of investor sentiment this week when it auctions more government debt on Thursday. Its 10-year bond yields have eased to around 6.5 percent, close to the 7 percent level at which other indebted countries have been forced to seek an international bailout.

COMMODITY SELL-OFF

The past week has been another bearish one for commodities as investors fear the slowdown in China coupled with the faltering U.S. recovery will hurt demand.

According to analysis by Standard Chartered Bank, funds that specialize in tracking commodity prices have seen assets under management (AUM) fall $1 billion since the start of the year. However, this was mainly due to price falls. Last week saw outflows of $91 million or 0.6% of AUM.

In price action on Monday Brent crude lost nearly 2 percent to hit a session low of $95.63 a barrel, its lowest since late January 2011.

U.S. crude fell $1.82 to $81.41 a barrel after tumbling as low as $81.32 earlier in the session, its lowest level since last October.

Gold mostly held its ground around $1,615 an ounce after its biggest rally in more than three years on Friday suggested bullion is regaining its safe-haven draw.

(Additional reporting by Anirban Nag and Tricia Wright.; Editing by Will Waterman and Elizabeth Piper)

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