NEW YORK (Reuters) ? Global stocks and the euro slid on Tuesday after the leaders of France and Germany failed to live up to market expectations for a solution to Europe's debt crisis and weak German growth data renewed worries about the world economic outlook.
President Nicolas Sarkozy of France and German Chancellor Angela Merkel agreed to float proposals in September for a tax on financial transactions and to push for closer joint governance of the euro zone's economic policy.
But the two leaders, meeting in Paris, said there was no need to increase the size of the euro zone rescue fund and that they saw no immediate need for joint euro zone bonds.
"Investors were looking for some big-picture solution to the euro zone debt crisis. Looking at these headlines, I don't think much has been achieved," said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Connecticut.
German Bund futures wiped out earlier losses and rose, and prices of U.S. Treasuries advanced further. While the euro briefly recouped losses against the dollar after Sarkozy said he and Merkel are determined to defend the euro, it later gave up those gains.
The euro fell 0.26 percent to $1.4407 as the benchmark 10-year U.S. Treasury note rose 26/32 in price, driving its yield down to 2.22 percent.
Weak economic growth in Germany clouded the global economic outlook before the Franco-German meeting ended. Germany reported that growth in gross domestic product slowed to a mere 0.1 percent between April and June, the weakest quarterly rate since 2009.
The data from the euro zone fueled concerns about a Europe already weakened by a fiscal crisis, an issue Merkel and Sarkozy tried to address with wide-reaching plans.
"Overall there are a lot of question marks coming out of this summit," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York. "This does not seem to be a game-changer or a show-stopper."
Risky assets such as stocks and commodities have been hit hard in recent weeks. Bank exposure to Greek and Italian debt has raised short-term borrowing costs for European institutions as well as the cost of insuring their debt against default.
U.S. stocks fell after three days of gains and global stocks, as measured by MSCI's all-world equity index, were off 0.9 percent.
The Dow Jones industrial average was down 114.28 points, or 1.00 percent, at 11,368.62. The Standard & Poor's 500 Index was down 15.98 points, or 1.33 percent, at 1,188.51. The Nasdaq Composite Index was down 42.43 points, or 1.66 percent, at 2,512.77.
Wall Street extended losses after news of the Sarkozy-Merkel meeting.
Earlier, Wall Street had pared some declines after a better-than-forecast U.S. industrial output report for July and Fitch's affirmation of its top credit rating for the United States with a stable outlook.
The dollar was up against a basket of major currencies, with the U.S. Dollar Index up 0.17 percent at 73.962.
Oil prices extended losses after the Sarkozy-Merkel meeting failed to calm concerns about the euro zone debt crisis.
North Sea Brent crude fell 0.4 percent to $109.46 a barrel, while U.S. light sweet crude oil settled down $1.23 at $86.65.
Spot gold prices rose $16.09 to $1,781.00 an ounce.
(Reporting by Gertrude Chavez-Dreyfuss, Rodrigo Campos and Karen Brettell in New York; Brian Gorman, Zaida Espana, Jan Harvey and Harpreet Bhal in London; Writing by Herbert Lash; Editing by Leslie Adler and Dan Grebler)
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