 "Brighter China data fail to lift world stocks")
China's economy grew 7.3 per cent in July-September official data showed, slightly above the 7.2 per cent forecast by analysts. However, the growth was the weakest for any quarter since the 2008/09 global financial crisis.
There had been a subdued reaction in Asia and European markets also started cautiously before gradually finding their feet.
Europe's main bourses were up by 0.2 to 0.6 per cent as trading settled though euro zone periphery debt markets were under pressure again as worries about debt levels continued to weigh. Activity was also mixed in the currency market. The Australian dollar, often seen as a liquid proxy of Chinese growth prospects given Australia's large trade exposure, got a lift from Beijing's data, while the US dollar remained on the back foot.
The US currency has lost roughly two per cent over the last 10 days on signs that global growth and inflation are faltering, fuelling doubts about whether the US Federal Reserve will be able to push ahead in the next year with its first post-financial crisis interest rate hike.
"The main price action is that the dollar is continuing to correct lower," said Lee Hardman, a currency strategist at Bank of Tokyo Mitsubishi in London. "That is largely the reflection of markets pushing back expectations of Fed tightening (interest rate hikes)." "The China data is a bit of a mixed bag but the bigger picture is that the economy is still losing momentum and will continue to slow into next year."
Shares in French oil giant Total were also in focus after its chief executive Christophe de Margerie was killed when his plane collided with a snow plough during takeoff at a Moscow Airport. Like much of the region's stock markets though Total shares fought back from a early 1.2 per cent drop to be back level at 0800 GMT.
A breakdown of the data from China showed industrial output rose a better-than-expected eight per cent in September from a year earlier, up from August's six-year low of 6.9 per cent growth. However, fixed-asset investment and retail sales figures were weaker than expected, suggesting that Beijing may still need additional economic support measures.
MSCI's broadest index of Asia-Pacific shares outside Japan ended broadly flat as the Shanghai Composite index slipped 0.4 per cent.
Japan's Nikkei also took a heavy two per cent hit, as the yen took advantage of the weakened dollar and as investors locked in profits after the previous session's four per cent rally.
Wall Street had marked solid gains overnight as a quarterly earnings miss from IBM was outweighed by a better-than-expected 12 per cent jump in revenue from gadget giant Apple.
The yield on benchmark US 10-year notes slipped back to 2.137 per cent in early European trade, compared to Monday's US close of 2.183 per cent.
That was despite Dallas Federal Reserve President Richard Fisher saying on Monday that last week's turbulent trading should not stop the Fed from ending its stimulus programme and the economy could be fully recovered from the effects of the financial crisis and recession by as early as next year.
In commodities trading, spot gold added about 0.3 per cent to $1,249.60 an ounce, bolstered in part by renewed physical demand related to Diwali this week.