* China slowdown adds to worries about global recovery
* Global equities, commodities under pressure
* Market eyes ECB 6-day loan to gauge bank liquidity
* MSCI world stock index plumbs fresh three-week lows
By Ian Chua
LONDON, July 1 (Reuters) - Investors gave stocks and
commodities a wide berth on Thursday on mounting worries about
the strength of the global economic recovery after manufacturing
data showed China's rapid growth was slowing.
Moody's warning late on Wednesday that it may cut the credit
ratings of Spain added to the sour mood, which saw
higher-yielding assets pressured. []
Investors were also waiting to see how much banks, due to
pay back 442 billion euros of one-year loans, will borrow from
the European Central Bank's six-day funding facility -- a gauge
of how dependent banks are on the ECB. []
"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."
Starting the second half of the year on a negative footing,
MSCI's all-country world stock index <.MIWD00000PUS> fell 0.6
percent to three-week lows, with its more risk-sensitive
emerging market counterpart <.MSCIEF> down 0.8 percent.
The MSCI world stock index fell 10.4 percent in the first
half of 2010.
The FTSEurofirst 300 <> index of top European shares
shed 1.4 percent, while the euro zone's blue-chip index, Euro
STOXX 50 <>, fell 1.4.
Earlier, Japan's Nikkei average <> fell 2 percent to a
seven-month closing low.
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. []
Bank stocks stayed under pressure with the STOXX Europe 600
banking index <.SX7P> falling 2.1 percent as investors waited to
see how much funding demand a ECB tender will attract. The
result is due at around 0925 GMT.
On Wednesday, banks borrowed 132 billion euros of
three-month money from the ECB, far less than the 210 billion
euros forecast by analysts in a Reuters poll, easing some of the
markets' worst fears about funding stress. []
EURO REBOUNDS
In the foreign exchange market, the euro reversed earlier
declines, but commodity-based currencies like the Australian
dollar fell on growth worries.
The euro rose 0.4 percent on the day against the greenback
to $1.2284 <EUR=> and was 0.5 percent firmer against the yen at
108.71 <EURJPY=>.
"It was down to the downgrade outlook for Spain, which has
forced investors to scale back positions on pro-cyclical and
commodity-related currencies," said Carl Hammer, chief currency
strategist at SEB in Stockholm.
The Aussie dollar <AUD=D4> shed 0.3 percent to $0.8372.
Oil prices fell for a fourth consecutive day, down 1.5
percent at $74.49 a barrel <CLc1>, while three-month copper
futures on the London Metal Exchange slid 2.1 percent <MCU3=LX>
to $6,388.00 a tonne.
Against a risk averse backdrop, safe-haven assets such as
U.S. Treasuries fared well, helping keep yields pinned down. The
two-year U.S. Treasury note yield <US2YT=RR>, at 0.62 percent
was not far off a record low of 0.59 percent set on Wednesday.
(Additional reporting by Blaise Robinson, Kevin Plumberg and
Naomi Tajitsu, editing by Mike Peacock)
