Chinese manufacturing slumped for a fifth month in March and the euro zone economy is showing new signs of wilting, according to surveys on Thursday that pointed to weakening global demand.
Investors were unnerved by the reports, selling riskier assets such as stocks.
Thursday's batch of purchasing managers indexes (PMIs) suggested China and Europe will not contribute to a global upturn any time soon, with only the United States showing momentum at the moment among the world's top economies.
Factory activity in China shrank for a fifth straight month in March, hit by declining order books and disappointing exports.
That partly reflects the weakness of economies in Europe, China's single biggest export partner. The PMIs pointed to a worsening of the euro zone economy with recession there now looking unavoidable.
German and French manufacturing, which this time last year spearheaded the euro zone's economic recovery, suffered a sharp decline this March that even the most pessimistic economists failed to predict.
Investors immediately hedged exposures to trades betting on a rebound in global growth. Brent crude oil shed 0.8 percent, while the pan-European FTSE Eurofirst 300 stock index slipped 0.8 percent after the PMI data.
"The PMIs give a warning that even if the U.S. economy seems to be doing quite well, that doesn't necessarily translate to solid growth in every other part of the world," said Jonathan Loynes, chief European economist at Capital Economics in London.
The HSBC flash purchasing managers index, the earliest indicator of China's industrial activity, fell back to 48.1 from February's four-month high of 49.6, firmly below the 50 mark that divides contraction and growth.
The survey added weight to a string of downbeat anecdotes from major corporations on the world's No. 2 economy. BHP Billiton, the world's biggest miner, said on Tuesday it was seeing signs of "flattening" iron ore demand from China.
Broad-based weakness in the five key components that generate the Chinese PMI index surprised analysts, particularly those who had anticipated a clear cut rebound in factory activity in March after the Lunar New Year disrupted output in the first two months and distorted the data.
"This data suggests there's something more profound at work, that it's not just a Lunar New Year problem and that it's not just affecting exports, but domestic demand," said Tim Condon, chief economist and head of Asian research at ING in Singapore.
EUROPE FLAGS AGAIN
Markit's Eurozone Composite PMI declined unexpectedly to 48.7 in March from 49.3 in February, a full point below the economists' consensus of 49.7 and capping the first quarter of the year in disappointing style.
Most worryingly, the surveys suggested business activity in economic heavyweights France and Germany is starting to flag, with job losses mounting across the bloc at the fastest pace since March 2010.
"We're more pessimistic than the consensus on the euro zone over the next year or two, both in terms of the outlook for the economy and also the currency union itself. So in that sense, these numbers give some support to that view," said Mr. Loynes from Capital Economics.
The European Central Bank has pumped more than €1-trillion of cheap, three-year loans into the banking system over the last four months - lowering bond yields - but the PMIs showed the impact of this has yet to be felt in the wider economy.
"While we still see a good chance of the recession in the euro zone coming to an end in spring, it seems unreasonable to expect more than an anemic upward movement in the further course of this year," said Christoph Weil, economist at Commerzbank in Frankfurt, in a research note.
PMI compiler Markit said the surveys were consistent with a decline of 0.1 percent in euro zone gross domestic product during the first quarter, following on from the 0.3-per-cent decline seen in the last three months of 2012.
With France and Germany now struggling, Markit said it was hard to see what could drive the currency union forward in the months ahead, especially since many of its smaller countries are already mired in recession.
"The austerity measures implemented there are going to keep some major economies such as Italy and Spain in recession, which is going to damage the region as a whole," said Chris Williamson, chief economist at Markit.
By contrast, Britain should at least avoid a recession, but hopes the UK economy will pick up momentum were dealt a blow on Thursday with news that retail sales suffered their biggest monthly fall in nine months in February.