By Barani Krishnan and Herbert Lash
NEW YORK (Reuters) - Global equity markets sold off on Thursday on disappointing Chinese manufacturing data and weak corporate earnings, while the euro jumped against the dollar after mostly encouraging business surveys from the euro zone's private sector.
MSCI's emerging markets equities index fell 1.3 percent as emerging sovereign debt spreads widened 9 basis points over U.S. Treasuries after factory activity in China contracted in January for the first time in six months.
A decline in the flash Markit/HSBC Purchasing Managers' Index in China, the world's second-largest economy, reinforced concerns about global growth, especially in commodity-sensitive emerging markets.
The Turkish lira touched a record low, the ruble hit a five-year low and gold surged more than 2 percent, notching its biggest one-day rally in three months, on its safe-haven appeal.
U.S. stocks fell, with the Dow Jones industrial average recording its third consecutive day of losses, after the manufacturing data in China and a mixed bag of U.S. corporate earnings.
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"The China data continues to be persistently weak. We don't view this as a one-off kind of number and we do view the PMI series as especially credible," said Jim Russell, senior equity strategist for U.S. Bank Wealth Management in Cincinnati.
Data supporting investor fears that expectations for future earnings growth will be reduced helped spur the equity selloff, said Brad McMillan, chief investment officer at Commonwealth Financial in Waltham, Massachusetts.
"We have seen some disappointing numbers on both earnings and revenues, and the prices that looked reasonable based on double-digit earnings growth are looking less so when you dial that back," McMillan said.
On Wall Street, the Dow Jones industrial average closed down 175.99 points, or 1.07 percent, to 16,197.35. The S&P 500 lost 16.4 points, or 0.89 percent, to 1,828.46 and the Nasdaq Composite dropped 24.126 points, or 0.57 percent, to 4,218.875.
Offshore drilling contractor Noble Corp slumped 8.6 percent to $33.13, the worst performer on the S&P 500, after saying Wednesday that rig utilization was expected to drop this year.
European shares fell on poor corporate results and the weak Chinese data. Nokia reported a steep drop in network equipment sales, an area soon to become its core business after its telephone division is sold.
British publisher Pearson dropped 8.2 percent after warning that its 2013 earnings per share would be lower than expected.
U.S. jobless claims data suggested a moderate pace of job growth, and the Fed is expected to continue to taper its bond purchases when it meets next week.
The dollar tumbled, pressured by the strong manufacturing data in the euro zone and new regulations in Switzerland that raised the level of capital banks must hold against their mortgage books, tightening Swiss monetary conditions.
The greenback fell more than 1 percent against the euro and the Swiss franc. The dollar fell to a three-week low against the franc and marked its biggest single-day slump against the currency since late May.
The euro rose 1.1 percent against the dollar to $1.3695, after hitting $1.3698, its strongest since January 14.
The dollar dropped 1.51 percent against the Swiss franc to 0.8974 franc. Against the yen, the dollar fell 1.3 percent at 103.15.
The Argentine peso suffered its steepest single-day decline since the country's devastating 2002 financial crisis, extending Wednesday's losses, as the central bank gave up trying to prop up the currency.
Copper fell and London-traded Brent crude oil slipped below $108 a barrel after the weak data from China revived worries over the demand outlook.
Brent crude fell 69 cents to settle at $107.58 a barrel. U.S. oil settled up 59 cents at $97.32.
"The data is a bit concerning," said Ken Hasegawa, a commodity sales manager at Newedge Japan. "There was a big increase in U.S. crude oil stocks and now China PMI numbers are worse than expected. That's making the market come off."
U.S. government bond prices rose, with prices on the 10-year note gaining 22/32 to yield 2.7790 percent.
(Additional reporting by Herb Lash in New York and Marc Jones in London; Editing by Nick Zieminski, Paul Simao and Leslie Adler)