GLOBAL MARKETS-Asian shares, oil prices tumble on growth worries

2014-10-10

* Japan's Nikkei down 1.2 pct, ex-Japan Asia MSCI off 1.5 pct

* Weak German data fuels euro zone recession fears

* European markets all seen opening lower

* Investors fear weak world economy may hurt U.S. growth

* Oil prices hit lowest levels since 2012

By Lisa Twaronite and Hideyuki Sano

TOKYO, Oct 10 (Reuters) - Asian shares shuddered and Brent crude oil prices tumbled to their lowest since 2010 on Friday after weak German export data raised fears that Europe's economic woes could drag down the global economy.

A bleak market day dawned in Europe, where futures for the Euro STOXX 50, the UK's FTSE 100, Germany's DAX and France's CAC were all down more than 1 percent, indicating that opening losses were likely.

"European markets face the prospect of a weak open and the bulls will hope for improvement in French and Italian industrial production today. One suspects the negative news low will continue," Chris Weston, chief market strategist at IG in Melbourne, said in a note.

Many investors fear that the gradually recovery U.S. economy - the world's largest, but comprising less than a quarter of the entire global economy - cannot escape unscathed as Europe stalls and other big economies, including China, Japan and Brazil, face their own hardships.

"The global economy continues to recover moderately. But the degree of recovery varies quite a lot from country to country," Japanese Finance Minister Taro Aso told reporters in Washington, where he's attending the annual International Monetary Fund meetings.

MSCI's broadest index of Asia-Pacific shares outside Japan shed 1.5 percent in late afternoon trade, leaving it down 0.8 percent for the week.

Japan's Nikkei share average ended down 1.2 percent as the yen strengthened on safe-haven bids, and skidded 2.6 percent this week. Japanese markets are closed on Monday for a holiday.

Hong Kong's Hang Seng Index was down 1.8 percent, undermined by global growth fears as well as concern about a possible flare-up in pro-democracy protests there after students said they would maintain their campaign after the city government cancelled talks.

Worries about global growth hit oil prices hard. European benchmark Brent crude oil fell as low as $88.11 a barrel, its lowest since December 2010. It last stood at $88.77, down 1.4 percent on the day.

U.S. crude futures plunged 1.9 percent to $84.14, after dropping as low as $83.59, their lowest since July 2012.

The latest tumble was a reverberation from Germany's downbeat data on Thursday, which showed exports from the engine of the euro zone economy fell 5.8 percent in August, the worst decline since January 2009.

A string of dismal data from Germany in recent weeks has fed anxieties about recession in the euro zone.

Wall Street stocks slumped 2 percent on Thursday, with the S&P 500 index hitting a two-month closing low. The CBOE volatility index, a measure of investor anxiety, rose to highs not seen since early February.

"If U.S. stocks jumped back today, then the market could go back to the same habit of assuming everything will be all right. But if they fall big for two days in a row, markets will be clearly entering a whole new phase," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.

Anxieties about global economic growth smothered a short-lived rally in equity markets around the world that was sparked by speculation the Federal Reserve would not rush interest rate rises.

Adding to jitters, St. Louis Federal Reserve Bank President James Bullard said he was concerned by a disconnect between the market's view of the Fed's rate-increase path and the central bank's own view.

Financial markets have constantly expected much slower tightening by the Fed than U.S. central bank policymakers' own projections.

Federal funds rate futures <0#FF:> are pricing in rate hikes to just above 0.50 percent by the end of next year, far below the Fed board members' median forecast above 1.25 percent.

The 10-year U.S. Treasuries yield fell to a 16-month low of 2.2790 percent on Thursday before bouncing back slightly on profit-taking. It last stood at 2.324 percent, down from the U.S. close of 2.327 percent.

The euro steadied on Friday, inching slightly higher to $1.2297. It had reached a 2-1/2 week high of $1.2791 early on Thursday, before the downbeat German data knocked it lower.

The risk-off mood underpinned the yen, with the dollar trading at 107.80 yen, having fallen to three-week low of 107.53 yen on Thursday.

The dollar's index against a basket of six major currencies edged down to 85.510. It slipped as low as 84.937 on Thursday, its lowest level since late September, moving away from a four-year high of 86.746 hit one week ago.

Spot gold edged down 0.1 percent to $1,222.40 an ounce but retained most of its gains from a four-day rally, and was headed for its best week in nearly four months on safe-haven buying.