LONDON -- The mood in financial markets turned sour Thursday after a round of disappointing economic news prompted investors to check their recent enthusiasm.
Figures from Europe, Japan and China reminded investors that the world's economy is struggling, though a positive bond auction from Spain helped limit the retreat in markets.
Among the sobering news for investors was a survey in Europe pointing to a deepening recession, figures from Japan that showed the country's powerhouse export sector was continuing to suffer and a private survey of manufacturers in China that showed activity fell again in September, though at a slightly slower pace than August.
"These data suggest global growth is yet to turn the corner, mitigating some of the positive market impact from the recent policy actions by the European Central Bank, Federal Reserve and Bank of Japan," said Vassili Serebriakov, an analyst at Wells Fargo Bank.
In the wake of the figures, stocks fell and the euro dropped below $1.30 for the first time in a week.
In Europe, the FTSE 100 index of leading British shares was down 1.1 percent at 5,825 while Germany's DAX fell 0.8 percent to 7,330. The CAC-40 in France was 1.1 percent lower at 3,494.
In the U.S., the Dow Jones industrial average was down 0.5 percent at 13,510 while the broader S&P 500 index fell 0.7 percent to 1,450.
Over recent weeks, stocks had spiked higher and the euro had jumped above $1.30 for the first time since the spring -- signs of increased optimism.
Markets were driven by a series of apparent breakthroughs in European leaders' efforts to solve the debt crisis and another monetary stimulus from the U.S. Federal Reserve.
But this week, markets have largely treaded water despite further monetary easing from the Bank of Japan and continued easing in Europe's debt crisis, evidenced by a stabilization in the borrowing rates of euro countries like Italy and Spain.
"There have been clear signs this week that the shine has come off the summer's boost in optimism," said Jane Foley, an analyst at Rabobank International. "That said, these corrections remain modest in light of the moves registered since July."
Alongside stocks, the euro was also giving up some of its recent gains, trading 0.9 percent lower at $1.2930. It received little support from the news that Spain raised (euro) 4.8 billion ($6.2 billion) in a debt auction Thursday that saw strong demand and a drop in a benchmark interest rate.
Earlier, the losses in Asia were more acute than in Europe, largely because they enjoyed a stronger advance Wednesday in the immediate aftermath of the Bank of Japan's easing.
Japan's Nikkei 225 index dropped 1.6 percent to close at 9,086.98 while South Korea's Kospi shed 0.9 percent to 1,990.33. Hong Kong's Hang Seng lost 1.2 percent to 20,590.92.
In mainland China, the Shanghai Composite Index tumbled 2.1 percent to 2,024.84, the lowest closing in more than three years. The Shenzhen Composite Index lost almost 3 percent to 840.21.
Oil prices fell again in the wake of the economic figures, with the benchmark New York rate 37 cents lower at $91.97 a barrel.