Global stocks, emerging markets swoon on China data; euro up

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 survey results 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 was the first indication of sentiment this year in the world's second-largest economy, and reinforced concerns about global growth, especially in commodity-sensitive emerging markets.

 

The Turkish lira touched a record low, the rouble hit a five-year low and the Argentine peso tumbled 11 percent at one point. Copper fell and London-traded Brent crude oil slipped below $108 a barrel after weak data from the world's top two oil consumers revived worries over the demand outlook.

"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.

European shares fell on poor corporate results and weak U.S. and 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 , meanwhile, dropped 8.2 percent after warning in a trading update that its 2013 earnings per share would be lower than expected.

On Wall Street, the Dow Jones industrial average fell 194.9 points, or 1.19 percent, to 16,178.44, the S&P 500 lost 20.35 points, or 1.1 percent, to 1,824.51 and the Nasdaq Composite dropped 37.211 points, or 0.88 percent, to 4,205.789.

Data to support 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.

Offshore drilling contractor Noble Corp slumped 8.6 percent to $33.15, the worst performer on the S&P 500, after saying Wednesday that rig utilization was expected to drop this year.

U.S. jobless claims data also suggested a moderate pace of job growth but not enough for the Federal Reserve to accelerate its pace of reducing its bond-purchase stimulus.

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 to a one-week low against the euro and Swiss franc. It also fell sharply against the yen.

The euro rose 1.1 percent against the dollar to $1.3695, after hitting $1.3698, its strongest since January 14.

The dollar dropped 1.5 percent against the Swiss franc to 0.8974 franc. Against the yen, the dollar fell 1.3 percent at 103.14.

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 23/32 to yield 2.7754 percent.

Gold surged more than 2 percent, notching its biggest one-day rally in three months, as the equity sell-off and weak Chinese data lifted its safe-haven appeal.

(Additional reporting by Herb Lash in New York and Marc Jones in London; Editing by Nick Zieminski and Paul Simao)