Another buoyant set of weekly U.S. jobless claims figures were not enough to turn markets around Thursday, with most stocks trading lower following poor economic indicators from Europe and China.
In what is turning out to be one of the worst weeks for stocks this year, investors are increasingly shaken by a run of downbeat economic data _ a, particularly out of China, the world's second-biggest economy. News that the number of people seeking U.S. unemployment aid fell to a four-year low of 348,000 last week helped limit the retreat.
The catalyst to Thursday's declines was a Chinese manufacturing index compiled by HSBC. Its main index fell to 48.1 in March from 49.6 in February. Figures below 50 indicate that manufacturing is contracting.
Earlier this week, soft Chinese housing data and a warning from miner BHP Billiton have stoked concerns about the economic outlook in China, which has helped cushion the global economy over the past few years.
A similarly weak eurozone survey from financial information company Markit only added to concerns. Its composite purchasing managers' index, which combines the services and manufacturing sectors, fell to a below-forecast 48.8 points in March from 49.3 the month before.
Also dispiriting were Irish GDP figures showing the country fell back into recession in the fourth quarter, when the economy contracted by 0.2 percent.
Since stocks are a leading indicator of economic activity a few months down the line, investors are worried that the recent rally has overestimated the pace of the recovery. Many of the world's major indexes recently hit multi-month highs, with those in the U.S. trading even higher.
Jane Foley, an analyst at Rabobank International, said the disappointing data would likely "instill a risk off tone for the remainder of the week."
In Europe, the FTSE 100 index of leading British shares closed 0.8 percent lower at 5,845.65 while Germany's DAX fell 1.3 percent to 6,981.26. The CAC-40 in France shed 1.6 percent to 3,472.46.
The euro suffered in the more risk-averse environment, trading 0.2 percent lower at $1.3188.
The borrowing costs for both Spain and Italy bucked the trend in the bond markets and spiked higher amid concerns over the European economic outlook.
The yield on Italy's 10-year bond was up 0.16 of a percentage point to 5.08 percent while Spain's equivalent rose 0.10 of a percentage point to 5.46 percent. Though still a long way from levels seen at the end of 2011, the increases are likely to remind investors that Europe's debt crisis is far from being solved despite the European Central Bank's massive loans to banks and Greece's second bailout.
In the U.S., the Dow Jones industrial average was 0.5 percent lower at 13,058.14 while the broader S&P 500 index fell 0.7 percent to 1,393.68.
One potential boon from the re-evaluation in global growth prospects is that the pressure on oil prices has eased. The benchmark New York rate was down $2.19 at $105.08.
In recent weeks, the rise in oil prices had become an increasing worry in the markets as it stokes inflation and hinders economic activity.
The retreat in Asia earlier was less marked than that in Europe. The Nikkei 225 index in Tokyo ended 0.4 percent higher at 10,127.08 after Japan announced it had posted its first trade surplus in five months in February, on a recovery in auto and electronics exports to the United States.
Hong Kong's Hang Seng closed up 0.2 percent at 20,901.56 while mainland China's benchmark Shanghai Composite Index slipped 0.1 percent to 2,375.77.
Pamela Sampson in Bangkok contributed to this report.