UK and European shares posted losses across the board Thursday after poor economic data from China, Britain and the Euro Zone challege the investor consensus of a robust global economic recovery.
The UK benchmark FTSE 100 index fell 0.9 percent by the close of trading, while Germany's DAX and France's CAC-40 declining 1.3 percent and 1.5 percent respectively.
US shares opened lower Thursday, and continuted trading in the red following a global market slump that hit stock markets around the world after data from China and German indicated weakness in the fragile economic recovery.
The Dow Jones Industrial Average shed 68 points in the opening minutes of trading, falling to 13,053, while the broader S&P 500 dipped 10 points to trade at 1,392. The tech-heavy Nasdaq, the day's best performer, lost around 4 points and was trading at 2,732 shortly after the European close.
A meausure of leading economic indicators for the month of February may give the markets support later in the session. The Conference Board said the index of future activity grew by 0.7 percent to 95.5 from January, slighlty better than Economists had anticipated.
The broadest measure of global equity market performance, the MSCI main world equity index, had earlier fell 0.8 percent to an 8-day low after touching six-month highs late last week.
Investor focus was dominated by manufacturing data from China, the world's second-largest economy, which fell for a fifth straight month, according to HSBC's closely-watching purchasing managers (PMI) index. New orders from the world's biggest exporter sank to a four-month low.
The first indication, or flash reading, of HSBC's PMI was 48.1, down from 49.6 in February. Figures under 50 generally indicate contraction, while those over 50 signal expansion. China's numbers indicate a GDP growth rate for 2012 of around 8 percent, an improvement on the government's 7.5 percent estimate but sharply slower than the 9 percent average of recent years.
A similar measure of economic activity in Germany, the Markit PMI, was also disappointing. March's reading was also 48.1 - a four month low - and well below analysts' expectations of 51.0. Activity in the services sector was slight more optimistic, coming in at 51.8, but the figures were still below estimates of 53.0.
The two readings are likely to ignite concern about the strength of the global economy, and will be particularly concerning given the reliance of both China and Germany on fueling growth in the Asia-pacific region and in the Euro Zone.
Crude oil prices drifted lower in international markets after the China data was published, with Brent crude falling around 85 cents to a near two-week low of $123.35 per barrel.
Nymex light sweet crude, the US benchmark, fell more than $2 to trade below $105 per barrel for the first time in several days.
UK stocks also extended loses after data showing UK High Street sales fell more than forecast in February, casting doubt on a consumer led recovery in Europe's second-largest ecomony.
Monthly-adjusted sales for February fell 0.8 percent from the previous month, according to the Office of National Statistics, the biggest monthtly decline in almost a year. Analysts were expecing a decline of 0.5 percent.
Sales did rise from February 2010, the ONS said, by around 1 percent, while the annual increase for January sales was revised downward to 1.4 percent from a previous reading of 2 percent.
Government bonds were stronger after the data releases, with German Bund futures extending gains to a one-week high of 137.17 before easing back to 136.97. In the cash bond market, benchmark 10-year bund yields, which move inversely to prices, fell below 2 percent and traded as low as 1.93 ercent in the morning session.
UK gilts were also on the rise, with futures closing at a six-day 113.81 and building on modest gains following Wednesday's budget statement.
Sterling was slighty weaking on foreign exchange markets, falling 0.2 percent to trade at session-low 1.5770 against the U.S. dollar by the close of trading.