Global equities slipped on Friday and safe-haven bonds and gold rose on fresh jitters about the impact of the global credit crunch and concern after the assassination of Pakistani opposition leader Benazir Bhutto.
Fears that Bhutto's killing could trigger more turmoil in an already volatile region triggered a flight to quality assets in Asia. Stock markets there fell and investors sold dollars for yen in an unwinding of carry trades that typically thrive in calmer markets.
The FTSEurofirst 300 index of top European shares eased 0.4 per cent to stand just 1.4 per cent up on the year, its worst annual performance since 2002. In Asia, Japan's Nikkei Average, likely the worst performing index of 2007, closed down 1.7 per cent in its final session of the year.
Pakistani markets were closed but the country saw a wave of violence, including a blast that killed three people. Stocks in neighbouring India fell 0.3 per cent on worries the unrest in Pakistan might prompt investors to withdraw.
"Unrest in Pakistan is eroding market sentiment dramatically," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. "The implication for stock markets is worries about higher oil prices and a weaker dollar."
The dollar hit a two-week low against the euro and Swiss franc after falling sharply on Thursday when a soft US durable goods report was seen heralding more interest rate cuts by the US Federal Reserve.
The data added to unease about the US and the global economy, with jobless claims also rising and the Wall Street Journal reporting that several banks, hard hit by the US sub-prime mortgage mess, were considering selling parts of their businesses. MSCI's broad index of shares excluding Japan fell 0.4 per cent and emerging equities eased 0.2 per cent.
Oil, gold and bonds gained from the risk aversion. Crude prices edged higher towards $97 a barrel within sight of its record high, further boosted by a report showing US crude stocks at their lowest in nearly three years. Gold traded just off overnight one-month highs of $830.05 an ounce.