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Figures showing that China's services sector slowed sharply last month added to a stack of disappointing data from the world's second largest economy over the last week and left Wall Street eyeing another cautious start.
MSCI's world stock index, which tracks 45 countries, was at a three-week low following Beijing's hefty overnight drop and a rocky start to 2014 for Tokyo's Nikkei which saw its biggest fall in over two-months.
European moves were far more muted, however, as a raft of data showing the divergence between top economies Germany and France, but also the gradual recoveries in Italy and Spain, cushioned the impact.
Ahead of the start of U.S. trading, the pan-regional FTSEurofirst 300 had fought back to neutral territory as London's FTSE, Paris's CAC 40 and Frankfurt's Dax all recovered from early tumbles.
"You could argue we have had some mixed news on the economic front, but I think in general the trend in the numbers is an improving one globally," said Robert Parkes, an equity strategist at HSBC.
"The China is data is relevant but of course so are the euro zone PMIs that we have seen... We don't believe we are going to see a hard landing in China."
Despite the recovery in stocks there was still plenty of evidence of the caution the China data had fostered among investors.
Safe-haven European bonds were holding gains, copper - highly-attuned to China's fortunes - remained firmly under pressure, while in the currency market the dollar hovered near a four-week high.
CHINA
The culprit for the moves was growth in the China's huge services sector which slowed sharply in December to its lowest point since August 2011.
The figures also came hot on the heels of a similar official survey on Friday and two other PMIs last week showing factory activity also soured.
China's CSI300 share index sagged 2.3 percent, hitting a five-month low and MSCI's broadest index of Asia-Pacific shares outside Japan slid 0.8 percent to a three-week trough.
The Chinese index is now down 3.9 percent since the start of the year, adding to last year's 7.6 percent decline.
"The focal point of the Asian markets is more on Chinese growth and on Chinese political situation and how it's going to pan out this year" said Guy Stear, Asian credit and equity strategist at Societe Generale, as opposed to worries much of the world has about a reduction in U.S. central bank stimulus.
GOLD RUSH
The main beneficiary of the Asian tensions remained gold as it continued to rebound from last year's worst run in over three decades.
It was sitting at $1,238 an ounce as afternoon dealing gathered momentum in London, it's highest in three weeks and on course for a fifth day of back-to-back gains. Oil bounced too after four days of falls, with Brent at $107.76 a barrel.
"Weaker equities will have more of an impact on gold prices than a stronger dollar," said Helen Lau, an analyst at UOB-Kay Hian Securities in Hong Kong. "It is all about allocation by funds."
On the opposite side of the China coin was the South Korean won as it hit a near six-week low. Ongoing political uncertainty in Thailand also left the baht at a near four-year trough and Thai stocks at a 16-month low.
With Japanese equities taking a beating, the yen got some respite against the dollar, up 0.3 percent at 104.55 yen. And with the ECB's first meeting of the year looming on Thursday the euro edged up from a one-month low to $1.36.
Wednesday's December Fed meeting minutes and then Friday's non-farm payrolls data could determine the dollar's next move. They should give further clues on how quickly the Fed is likely to wind in its huge stimulus programme in the coming months.
"With the Fed having set the tapering process in motion, it would likely take a fairly significant miss to derail tapering expectations and push yields significantly lower from their year-end levels," analysts at BNP Paribas wrote in a note.
