Economy, euro zone crisis batter stocks

Reuters:  (Reuters) - World stocks sank for an eighth straight session on Friday, wiping $2.5 trillion (1.53 trillion pounds) off their value on the week, as concern ballooned over the slowing global economy and the spread of debt anguish into Italy and Spain.

Wall Street also looked set to open lower, contingent on what is in the latest U.S. jobs report due for release beforehand.

There was widespread demand for policymakers to beef up plans to tackle the euro zone's crisis and prevent the U.S. economy in particular from sliding back into recession.

One investment firm called for a "shock and awe" approach in Europe, a reference to the U.S.-led aerial assault on Iraq.

Global equities were down 1.5 percent on the day for a roughly 8.5 percent loss this week. Emerging market shares stumbled 3.2 percent on the day.

The pan-European FTSEurofirst 300 fell around 1.9 percent.

Gold jumped more than 1 percent and the oil and metals markets slumped with investors seeking safe havens and reacting to the prospect of a slower global economic growth.

Markets were bracing for the U.S. jobs data, a sensitive indicator at the best of times but a key gauge at the moment of the extent of the U.S. economy's troubles.

"The economic outlook is stressing investors to a great degree and sentiment is likely to remain extremely fragile," said Keith Bowman, equity analyst at Hargreaves Lansdown.

"The U.S. economy has been slowing and is moving into a phase where we are going to see spending cuts enforced. Investors are concerned as to where future growth will come from with this backdrop of debt for so many governments."

China and Japan called for global cooperation and French President Nicolas Sarkozy was to discuss the financial markets with German Chancellor Angela Merkel and Spanish Prime Minister Jose Luis Rodriguez Zapatero.

Apart from signs that the U.S. and global economy are weakening -- despite record low interest rates and the pumping of liquidity into the system -- the focus was clearly on Europe, where bond yields in Spain and Italy have been blowing out, threatening the same kind of refinancing problems that have already smitten Greece, Ireland and Portugal.

The European Central Bank disappointed investors on Thursday by buying Irish and Portuguese bonds but not Italian or Spanish.

"Would the ECB please get serious," Berenberg private bank said in a note. "We need a circuit breaker to stop the vicious circle in which fear feeds on fear."

INTERVENTION

The Swiss franc -- which the Swiss central bank has tried to weaken this week -- hovered near record highs against the euro and dollar, while the yen rose. Both are considered safe haven currencies.

The franc rose to a record high against the euro of 1.0710 francs in early Asian trade but retreated to 1.0881 in European dealing on fears of official action to weaken the currency.

"The Swiss National Bank is caught between a rock and a hard place. It's difficult to see the franc being anything but well bid in the current environment," said Jane Foley, senior currency strategist at Rabobank.

The ECB bought Portuguese and Irish government bonds, slightly easing pressure on Italian and other euro zone peripheral debt, which had earlier offered euro-era high premiums over less risky Germany.

But Italian 10-year government bond yields rose above their Spanish equivalent.

Italy has emerged as the market's major concern after a rescue deal that was intended to stop the spread of the crisis failed to convince investors it had the firepower to ease pressure on the vast Italian bond market.