* China slowdown adds to worries about global recovery
* Global equities, commodities under pressure
* ECB lends 111 bln euros in 6-day funds to banks
By Ian Chua
LONDON, July 1 (Reuters) - World stocks fell to three-week
lows on Thursday and commodity prices sagged after data showing
China's rapid growth was losing steam added to worries about the
strength of the global economic recovery.
Wall Street looked set to track Asian and European peers
lower with U.S. stock index futures <SPc1><NDc1><DJc1> all in
the red. []
Investors, however, took heart at the outcome of the
European Central Bank's offering of six-day loans, which saw
banks borrow 111.2 billion euros ($136.1 billion), a figure that
analysts said did not set off alarm bells.
Investors were worried that European banks are too reliant
on ECB funds, especially with the expiry of 442 billion euros of
one-year loans on Thursday.
"There's a bit of relief in the market that some of the
worries about funding concerns in Europe may be overdone," said
Nick Stamenkovic, strategist at RIA Capital Markets.
Also helping to lighten the mood was Spain's successful sale
of 3.5 billion euros of bonds despite Moody's warning late on
Wednesday that it may cut the country's Aaa credit ratings.
MSCI's all-country world stock index <.MIWD00000PUS> shed
0.4 percent, having earlier fallen as much as 0.9 percent to
fresh three-week lows. In the first half of 2010, it dropped
some 10 percent.
The FTSEurofirst 300 <> index of top European shares
and the euro zone's blue-chip index, Euro STOXX 50 <>
were both down about 0.9 percent.
Bank stocks pared losses after the ECB tender result with
the STOXX Europe 600 banking index <.SX7P> down 1.1 percent,
having earlier fallen more than 2 percent.
Earlier, Japan's Nikkei average <> slid 2 percent to a
seven-month closing low.
"Asian growth has been the engine of the world economy so it
doesn't bode well if China is losing steam," said Jacques Henry,
analyst at Louis Capital Markets, in Paris.
"The market had doubts about the global economy, and these
numbers are confirming the doubts."
An official survey showed the pace of Chinese manufacturing
activity slowed in June to the lowest since February, while
HSBC's separate purchasing managers' index dropped to a 14-month
low, with outright drops in output and new orders.
While China's growth had been expected to cool from a
double-digit pace in the first quarter, the latest reports
combined with Europe's debt crisis and persistent weakness in
the U.S. housing and labour markets to spread a negative view on
the global recovery. []
EURO REBOUNDS
The euro reversed earlier declines, but commodity-based
currencies like the Australian dollar fell on growth worries.
The single currency rose 0.7 percent on the day against the
greenback to $1.2314 <EUR=> and was a touch firmer against the
yen at 108.16 <EURJPY=>.
"(Today's ECB tender) implies less desperation of euro zone
banks to get spare cash," said Kit Juckes, currency strategist
at Societe Generale. "This is a reasonably good thing for the
euro."
The Aussie dollar <AUD=D4> shed 0.4 percent to $0.8365.
Oil prices fell for a fourth consecutive day, down 1.4
percent at $74.56 a barrel <CLc1>, while three-month copper
futures on the London Metal Exchange slid two percent <MCU3=LX>
to $6,389.00 a tonne.
Despite the risk averse backdrop, safe-haven assets such as
U.S. Treasuries struggled to make further gains with the
two-year yield <US2YT=RR> not far off a record low of 0.59
percent set on Wednesday.
In the euro zone, the benchmark two-year German government
bond yield <DE2YT=TWEB> climbed sharply to 0.7 percent as
short-term rates adjusted upwards to reflect lower money market
liquidity.
(Additional reporting by Blaise Robinson, Kevin Plumberg, Naomi
Tajitsu and William James; Editing by Toby Chopra)
