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 The China flash HSBC/Markit manufacturing purchasing managers' index
showed factory output contracted in the world's second-biggest
economy for the first time in six months.
In Europe signs were just as gloomy as the private sector in its
biggest economy, Germany, grew at the slowest rate in 16 months, and
in France a slight pick-up was overshadowed by the fastest drop in
new business in over a year.
"There has been a little bit of relief in markets recently, but I
think this will create another round of fears that the euro zone is
losing momentum," said Emile Cardon, a euro zone strategist at
Rabobank.
China's data had left Asian stocks excluding Japan's
high-flying Nikkei at a month low, and Europe's dour figures saw
stock markets in London, Frankfurt and Paris tumble 0.7, 0.6
and 1 percent.
With the data also raising pressure on the European Central Bank as
it ponders possible asset-buying schemes, euro zone government bond
yields kicked lower and the euro fell for the first time in three
days.
"I think this increases the chances that the ECB will actually start
buying government bonds," added Rabobank's Cardon.
Markets were also still digesting Wednesday's meeting minutes from
the U.S. central bank which suggested that it will still push ahead
with its first post-financial crisis rate hike next year.
The minutes said a number of Federal Reserve officials felt it would
be wise to provide some clarity soon on how swiftly rates might
rise. In discussing a long-term strategy statement officials plan to
issue in January, the minutes said there was widespread agreement
that inflation both above and below the central bank's 2 percent
target was equally costly.
SINKING IRON
U.S. stock futures pointed to 0.3-0.4 percent fall for the benchmark
S&P 500 and Dow Jones Industrial indicies when Wall Street resumes.
Inflation and jobs data is due as well manufacturing PMIs - seen as
one of the most reliable forward-looking indicators of growth.
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The Fed's hints of confidence about the economy further highlighted
the divergence in U.S. monetary policy relative to Europe and Japan.
The ECB and Bank of Japan are struggling to stave off deflation and
shore up their shaky economies.
Beaten down by the dollar again, the yen hit a seven-year low and
slid to a six year low against the euro despite the weak euro zone
data. The euro fetched $1.2530, off an overnight three-week high of
$1.2602.
In commodities, gold remained under pressure. It fell more than 1
percent on Wednesday after a poll showed support among Swiss voters
slipping to 38 percent in favour of a referendum that would require
the Swiss National Bank (SNB) to boost its gold reserves.
If the "Save our Swiss gold" proposal did pass, the SNB would be
banned from selling any of its gold reserves and would have to hold
at least 20 percent of its assets in the metal, compared with 7.8
percent last month.
China's data also landed another blow on the Australian dollar as
the price of iron ore , one of its big exports to China, hit a
five-year low.
Copper dropped too, falling 0.2 percent, though Brent oil stayed
steady just above $78 a barrel as the market waited for news on
possible cuts in oil output ahead of what is shaping up to be a
landmark OPEC meeting next week.
"The market has fallen to a level it is going to park at until it
gets anything more definitive about OPEC," said Ric Spooner, chief
market analyst at Sydney's CMC Markets.
(Additional reporting by Keith Wallis in Singapore, editing by John
Stonestreet)
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