Global stocks slid and the euro fell to a four-month low on Monday as a political impasse in Greece heralded a potential exit for the country from the euro zone, while a move to prop up lending in China and poor European data pointed to slower world growth.
Safe-haven currencies, including the dollar and the Japanese yen, rose and government debt gained as coalition talks in Greece on Sunday proved fruitless, increasing the chance of another election in mid-June.
Expectations are for the euro to continue falling, driven by speculation over the implications of Greece's possible exit from the euro zone, said Eric Theoret, currency strategist at Scotiabank in Toronto.
"The probability of a euro exit (by Greece) has risen in the past few hours," said Thomas Costerg, an economist at Standard Chartered Bank. "Fragility elsewhere in the euro area means that contagion from a Greek exit could be damaging."
European shares sank about 2% to their lowest levels in more than four months on the Greek crisis and signs a struggling Chinese economy. China cut bank reserve requirements on Sunday to free up an estimated 400 billion yuan for lending in a bid to avert a sudden slowdown in the world's second-largest economy.
The pan-European FTSEurofirst 300 index hit its lowest point since late December at 998.93, and the Euro STOXX 50 index of euro zone blue chips fell as far as 2,194.35 points, its lowest since December 2011.
Stocks on Wall Street opened almost 1% lower.
The Dow Jones industrial average was down 100.28 points, or 0.78%, at 12,720.32. The Standard & Poor's 500 Index was down 12.35 points, or 0.91%, at 1,341.04. The Nasdaq Composite Index was down 24.38 points, or 0.83%, at 2,909.44.
The yield on U.S. Treasury prices, which moves inversely to price, fell to their lowest levels since early October, breaking decisively below 1.80%, which has been a key resistance point.
The benchmark 10-year US Treasury note was up 17/32 in price to yield 1.78%.
Oil fell sharply to extend recent heavy losses as the mounting political uncertainty over Greece and the prospect for slower growth in China weighed on the demand outlook for energy.
Brent crude was down by $1.84 to $110.42 a barrel. US crude fell $2.12 to $94.01 a barrel.
The euro fell 0.4% to $1.2828. The U.S. dollar index was up 0.50% at 80.668, and against the Japanese yen, the dollar was down 0.19% at 79.77 yen.