Global shares slid on Friday after a record U.S. savings rate sparked concerns it may erode consumer spending and slow recovery, while the U.S. dollar fell following China's call for a super-sovereign reserve currency.
The weakness in equity markets helped boost the allure of fixed-income assets. U.S. Treasuries and euro zone government debt prices rose, sending U.S. benchmark yields to their lowest level in nearly four weeks, and Bund futures hit a one-month high.
Crude oil prices fell more than $1, pressured by the weakness on Wall Street and news that top African oil producer Nigeria would halt fighting with rebels in its energy-rich Niger Delta.
Data showed that while U.S. consumer spending and income both rose in May as government stimulus spread through the economy, much of the money was being socked away.
U.S. savings jumped to a record annual rate of $768.8 billion, the highest level since records began in 1959, and the saving rate climbed to a more than 15-year high of 6.9 percent.
"I don't think it is going to be any surprise that savings have to come up, that the consumer has to deleverage," said Henry Smith, chief investment officer of Haverford Trust Co in Philadelphia. "This is not a short-term phenomenon. This is going to play out over several years."
Smith said the savings rate is more data that shows "this expansion will be characterised by a below-average, slower expansion".
The Dow and S&P 500 slid even as a separate report showed consumer sentiment rose in June to the highest reading since February 2008 as hopes grew that the recession is abating.
But the technology-heavy Nasdaq outperformed, helped by a nearly 16 percent surge in shares of Palm Inc after it posted a narrower-than-expected loss Thursday and said demand was strong for its new Pre smartphone.
The Dow Jones industrial average closed down 34.01 points, or 0.40 percent, at 8,438.39. The Standard & Poor's 500 Index slid 1.36 points, or 0.15 percent, at 918.90. The Nasdaq Composite Index rose 8.68 points, or 0.47 percent, at 1,838.22.
The CBOE Volatility Index, often called Wall Street's fear gauge, fell to 25.93, its lowest close since Sept. 12, just before the collapse of Lehman Brothers precipitated enormous stock declines across the world.
European shares closed lower as drugmakers fell, led by Sanofi-Aventis, while commodity-related shares retreated as they tracked lower crude and metal prices.
The pan-European FTSEurofirst 300 index of top shares closed down 0.1 percent at 844.59 points after initially rising.
"Over the course of the day, sentiment has seemed to have dissipated," said Peter Dixon, strategist at Commerzbank. "I also think it is a bit of a reaction to the negative day in the U.S. Investors just want to sell and take profits."
Asian shares rose as higher oil and metals prices boosted resource stocks. MSCI's index of Asian stocks excluding Japan climbed 1.9 percent but remains below eight-month highs scaled at the start of June. Japan's Nikkei average ended up 0.8 percent at 9,877.39.
