By David Randall
NEW YORK - Turkey's worsening currency crisis sent world equities lower and cut into the value of emerging market stocks and currencies on Monday, while boosting the prices of German bonds and other stable assets.
The MSCI world equity index, which tracks shares in 47 countries, was down 0.8 percent on the day and 1.8 percent since Friday's open as the Turkish lira plunged to a record low, forcing the country's finance minister to announce an economic action plan to ease nerves.
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The lira has tumbled on worries over President Tayyip Erdogan's increasing control over the economy and deteriorating relations with the United States. It fell as much as 12 percent at one stage on Monday, then recovered to a loss of 8.5 percent.
"The plunge in the lira, which began in May, now looks certain to push the Turkish economy into recession, and it may well trigger a banking crisis," said Andrew Kenningham, chief global economist at Capital Economics. "This would be another blow for EMs as an asset class."
Emerging market stocks lost 1.97 percent.
In the United States, new record highs for Apple Inc and Amazon.com Inc were not enough to outweigh declines in financial companies that are the most likely to be affected by the steep decline in the lira.
"The global financial system is so interconnected that we tend to think of them as a group and financials come under pressure," said Art Hogan, chief market strategist at B. Riley FBR in New York.
The Dow Jones Industrial Average fell 125.44 points, or 0.5 percent, to 25,187.7, the S&P 500 lost 11.35 points, or 0.40 percent, to 2,821.93 and the Nasdaq Composite dropped 19.40 points, or 0.25 percent, to 7,819.71
The euro fell to a one-year low against the dollar on Monday and sank to a one-year trough against the Swiss franc as well.
European stocks fell on Monday, with a pan-European index of shares down 0.3 percent and the banking stock index as much as 2.6 percent lower.
The pan-European FTSEurofirst 300 index lost 0.31 percent.
Safe-haven government bonds were in demand, with yields on German 10-year debt, the benchmark for the euro zone, dropping to a one-month low.
Benchmark 10-year U.S. Treasury notes last fell 5/32 in price to yield 2.875 percent, from 2.859 percent late on Friday.
U.S. crude fell 0.47 percent to $67.31 per barrel and Brent was last at $72.76, down 0.07 percent on the day.
Spot gold dropped 1.4 percent to $1,193.52 an ounce. U.S. gold futures fell 1.52 percent to $1,200.50 an ounce.
(Editing by Alistair Bell; editing by Diane Craft and Tom Brown)