European stocks fell Monday after a key economic indicator pointed to more growth troubles for the eurozone and political developments in France and the Netherlands suggested diminishing support for using drastic budget cuts to fix the debt crisis.
A survey of the eurozone's manufacturing and services sectors, the so-called composite purchase managers' index published by Markit, fell in April _ to 47.4 points, compared with analysts' forecasts for a slight uptick to 49.3 from last month's 49.1.
The reading "supports the idea that eurozone economic activity is likely to experience recessionary conditions throughout the course of this year," Mark Miller, European economist at Capital Economics in London, wrote in a research note. A recession would hurt tax revenue and make debt harder to pay, as well as constrain the ability of better-off countries to rescue the more indebted ones.
The Stoxx 50 index of 50 European blue chips declined 1.8 percent by midmorning European time. Germany's DAX 30 dropped 2.8 percent to 6,563, France's CAC 40 fell 2.1 percent to 3,121 and the London FTSE shed 1.8 percent to 5,670. The euro fell 0.5 percent against the dollar to $1.3131.
U.S. stocks appeared headed downward at the open, with Dow futures off 1 percent at 12,857 and the Standard & Poor's 500 futures also down 1 perceant at 1362.90
Adding to the losses were election results in France and political turmoil in the Netherlands that highlighted the difficulty of using spending cuts to combat a crisis over too much debt in some countries _ and raised the chance European leaders might find themselves increasigly at odds over what to do.
The government of Dutch Prime Minister Mark Rutte appeared headed for new elections after failing to get support from a right-wing party for budget cuts.
And France saw Socialist Francois Hollande, a critic of austerity as a way out of the debt crisis, lead the first round of president elections over incumbent Nicolas Sarkozy.
Hollande wants to renegotiate a European treaty intended to limit excessive government spending in order to emphasize growth over austerity. If Hollande wins the final election round on May 6, economists fear those steps would upset France's delicate cooperation with Germany that has led Europe's efforts to resolve its financial crisis.
"If Hollande is really ahead of Sarkozy in two weeks, Europe will have to prepare for a new power balance as it will be the end of the common road for France and Germany, and that certainly has negative repercussions for the markets, the euro and the euro's stability," said Stefan Scharfetter of Germany's Baader Bank.
The European Union, lead by Germany and with France's assent, has pushed for governments to cut their deficits, and eurozone members have signed _ but not yet ratified _ a treaty tightening rules on running up too much debt. Bailed-out Greece, Ireland and Portugal are on enforced diets of cutbacks.
Spain and Italy, however, have recently had to let deficit-reduction targets slip. Italy's Prime Minister Mario Monti and Christine Lagarde, the head of the International Monetary Fund, are among leaders who have warned that cutting back too fast could hurt growth and actually make it harder to pay debts.
The eurozone economy shrank 0.3 percent in the fourth quarter and the EU's executive commission predicts it will shrink 0.3 percent this year.
Asian stocks also posted losses, especially in China. Hong Kong's Hang Seng fell 1.8 percent to 20,624.39. The benchmark Shanghai Composite Index lost 0.8 percent to 2,388.59 and the Shenzhen Composite Index lost 1.8 percent to 944.87.
A report on Chinese manufacturing suggested that a slowdown in growth may have bottomed out in the first quarter. HSBC's purchasing managers index for the Chinese manufacturing sector rose to 49.1 in April from 48.3 in March. Still, any reading below 50 indicates a drop in production.
Japan's Nikkei 225 index closed down 0.2 percent at 9,542.17. South Korea's Kospi slipped 0.1 percent and Australia's S&P/ASX 200 dropped 0.3 percent. Benchmarks in Singapore, Indonesia, Thailand and Taiwan were also lower.
In energy trading, benchmark oil for June delivery was down $1.12 at $102.76 a barrel in electronic trading on the New York Mercantile Exchange.
Pamela Sampson in Bangkok contributed to this report.