World stocks and the euro fell on Monday as fresh concerns about the banking sector and the lack of concrete action by Group of Seven finance chiefs fanned worries about the deteriorating global economy. Safer government bonds, which typically attract capital in times of falling risk aversion, gained as a result. Shares in part-nationalised Lloyds Banking Group fell more than 20 percent at one point, having lost a third of its value on Friday when the bank said its HBOS unit made a hefty loss last year due to a bigger-than-expected rise in bad loans. At a weekend meeting in Rome, G7 finance ministers and central bankers said they would do all they could do to fight recession but their statement lacked specifics to tackle the worst financial crisis in 80 years. The scale of the problems they face were underscored by data on Monday showing Japan sank deeper into recession with its economy suffering its worst quarterly contraction in 35 years. “There was not much reassurance coming out of G7,” said Justin Urquhart Stewart, director at Seven Investment Management. The MSCI world equity index and the FTSEurofirst 300 index of leading European shares were both down about 0.6 percent. Emerging stocks fell 1 percent. The euro fell a quarter percent to $1.2755. US crude oil lost 0.4 percent to $37.37 a barrel. The March bund futures rose 15 ticks. G7 financial chiefs made no specific reference to the yen's strength or sterling's weakness -- two currencies which investors had speculated could figure in the statement. The yen was down a quarter percent at 91.94 per dollar. Sterling traded at $1.4270, about 0.5 percent higher on the day. In Asian trading, sterling had slipped on speculation that British authorities were comfortable with its recent slide. The dollar hit a two-month high against a basket of major currencies, up 0.7 percent on the day. “There was nothing controversial in the G7 statement, so it is very much back to square one for the currency market now,” Brown Brothers Harriman said in a note to clients. “The main themes still relate to de-leveraging and to trying to assess which country is proving more aggressive or efficient in trying to tackle the financial market crisis.
