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The euro fell and German bonds rose on Tuesday after data revealed a slowdown in business activity in Germany and China in April, heightening concerns over the global growth outlook.
Markit's flash German composite Purchasing Managers' Index (PMI), measuring growth in both manufacturing and services, shrank for the first time in five months in April.
The data suggests Europe's largest economy may contract again after an expected recovery in the first quarter and increases the prospects the European Central Bank may cut rates at in next policy meeting in early May.
"The case for a rate cut is very strong right now," said Tobias Blattner, European economist at Daiwa Capital Markets.
The euro was down 0.3% after the data to around the $1.30 mark, while German Bund futures rose 4 ticks to 146.39, having been little changed before in early trade.
The pan-European FTSEurofirst 300 share index remained up 0.5% at 1,161.14 points, but had pared back its early gains. London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX were flat to 0.8% higher.
Earlier preliminary or "flash" HSBC China Purchasing Managers' Index for April hurt Asian shares and commodity prices, with London copper futures falling 1.5%, back towards an 18-month low.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5%, though MSCI's world equity index after a stronger session on Wall Street.
The HSBC report was China's first economic indicator for the second quarter and followed weaker-than-expected growth in first-quarter gross domestic product reported earlier this month, which triggered a sharp market sell-off last week.
Weaker-than-expected U.S. existing home sales data overnight also added to worries over prospects for the economy.
The yen was a big gainer on the growing uncertainty over the outlook rising broadly and leaving the dollar down 0.6 % at around 99.58 yen Monday despite hitting a high of 99.90 yen.
Gold recovered some ground after last week's tumble but more gold outflows from exchange-traded funds summed up investors' weakening confidence in the metal.
Spot gold was at $1,411 an ounce, moving away from a two-year low of $1,321.35 touched last week, but still some $50 below the closing level before the sell-off began.
Brent crude futures turned lower, trading down almost one % to $99.44 after rising for a third straight session on Monday.
