NEW YORK (Reuters) - Global stocks fell and oil and copper declined on Thursday after soft Chinese data drove worries about the strength of world economy.
The euro slipped against the dollar a day after hitting an almost one-month high. European Central Bank policy makers warned the euro zone could fall back into recession.
The ECB also warned that forcing private bondholders to accept losses on euro zone sovereign debt could damage the euro and hurt banks.
An index of U.S. bank shares slid 2.9 percent and an index of European lenders lost 3.7 percent.
Shares of JPMorgan Chase & Co., the second largest U.S. bank, slid 4.8 percent to $31.60. after it reported a drop in quarterly earnings. JPMorgan was the first major U.S. bank to post results this season.
Prices of U.S. Treasury debt rose as investors sought relative safety. Major stock markets and the euro had recently jumped sharply on hopes the debt crisis was close to being resolved.
"Over the last week we have seen a major short squeeze in a number of risk-sensitive assets," said Jens Nordvig, head of G10 currency strategy at Nomura in New York.
"But the fundamental picture remains clearly negative," he said. "We remain very skeptical that European policy makers will bring out a convincing policy response in coming weeks."
U.S. shares fell from three-week highs after China reported its trade surplus narrowed for a second straight month in September. Both imports and exports were lower than expected.
The Dow Jones industrial average fell 40.72 points, or 0.35 percent, to 11,478.13. The S&P Poor's 500 dipped 3.59 points, or 0.30 percent, to 1,203.66. The Nasdaq Composite gained 15.51 points, or 0.60 percent, to 2,620.24.
A spike in shares of chip makers helped drive the tech-heavy Nasdaq higher.
The S&P 500 has run up more than 10 percent from a 2011 low hit on Oct. 4; on Wednesday it notched the largest seven-day rally since March 2009 on growing optimism European leaders were making progress in tackling the region's debt problems.
World stocks as measured by MSCI were down 0.2 percent after six days of gains.
Crude oil imports into China, one of the largest engines of demand growth, dropped 12 percent in September from last year's record high. Brent crude fell 0.2 percent on the day, snapping a six-day winning streak. U.S. light crude futures dropped 1.2 percent, further hurt by a rise in stockpiles.
The soft data from China also pressured copper prices . The industrial metal, often taken as a proxy for economic growth expectations, fell 2.5 percent. China is the world's largest copper consumer, accounting for nearly 40 percent of global demand.
The euro slipped against the U.S. dollar, pulling back from a one-month high, after the ECB warned about the impact on the currency and the region's banks of involving bondholders in euro zone bailouts.
Slovakia's parliament backed a plan to bolster the euro zone's rescue fund after political parties agreed to hold an early election, concluding the ratification process in all euro zone countries.
But even with a revamped rescue fund, European banks remain vulnerable to a Greek default and to sovereign downgrades. That increases the urgency for them to raise more capital to remain financially sound, analysts said.
The single currency hit a New York session low of $1.3685 on trading platform EBS. It last traded at $1.3786, down less than 0.1 percent on the day. The euro on Wednesday touched its highest level versus the greenback since Sept. 16.
Italy sold 6.2 billion euros of debt, split across four bonds. But yields remained under pressure, and the European Central Bank stepped into the secondary market after the auction, buying Italian debt to cap rising yields.
The benchmark 10-year U.S. Treasury note was up 9/32, with the yield at 2.1798 percent.
Thirty-year bonds gained as much as two points after a $30 billion auction that saw yields fall below market forecasts. They last traded up 30/32 in price to yield 3.149 percent.
Additional reporting by Chuck Mikolajczak, Gertrude Chavez-Dreyfuss and Wenfang Zhou in New York; Editing by Leslie Adler