“The primary concern is the contagion risk associated with Greece and some of the other problematic nations in Europe and the follow-on effects on long-term economic growth. We may be in for more of a rough and volatile period.”

By Lynn Thomasson and David Merritt at Blommberg

The MSCI World Index of stocks erased its 2010 gain, the euro slid to a 14-month low and Treasuries rose as concern European nations will need to restructure debt outweighed growth in U.S. jobs and service industries.

The MSCI gauge of 23 developed nations’ stocks lost 1.2 percent at 4 p.m. in New York, dragging it down 0.9 percent for the year. The Standard & Poor’s 500 Index fell 0.7 percent to the lowest since March. Spain’s IBEX 35 Index sank 2.3 percent to an almost 10-month low. The euro plunged more than 1 percent versus the dollar for a second day. Nickel slid 11 percent and oil fell below $80 a barrel on concern the debt crisis will slow global growth. The 10-year Treasury yield fell 4 basis points to 3.55 percent and the German 2-year yield touched a record low 0.56 percent on demand for assets perceived as the most safe.

European Central Bank council member Axel Weber said there is a threat of “grave contagion effects,” while Moody’s Investors Service warned it may cut Portugal’s debt rating and three people were killed in an Athens fire set during protests against austerity measures. Pacific Investment Management Co.’s Bill Gross told CNBC that Greece, Spain and Portugal may need to restructure debt, while Goldman Sachs Group Inc. Chief Economist Erik Nielsen said Greece may be forced to restructure next year.

“The reason we have to worry is, let’s face it, this is a global environment,” said Jason Pride, director of investment strategy at Glenmede in Philadelphia, which manages $18 billion. “The primary concern is the contagion risk associated with Greece and some of the other problematic nations in Europe and the follow-on effects on long-term economic growth. We may be in for more of a rough and volatile period.”

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