Stocks slump as economic data bites, oil steady

By Herbert Lash

NEW YORK (Reuters) - Stocks fell on both sides of the Atlantic on Thursday after gloomy economic news in Europe and the United States and a steadying oil market snapped optimism that had been building from last week.

Oil prices recovered after falling to a seven-week low amid recent signs of slackening demand.

U.S. and euro zone government debt rose amid ample evidence of deteriorating economies. German business sentiment suffered its biggest drop since the September 11, 2001 attacks, British retail sales took a record fall and surveys of German, French and Italian businesses all came in below market expectations.

Stock market investors worried about reports pointing to more labor market weakness and no let up in the housing slump. Ford and Dow Chemical were both pressured by quarterly results that disappointed.

In Europe, Daimler (DAIGn.DE: Quote, Profile, Research, Stock Buzz) and Renault (RENA.PA: Quote, Profile, Research, Stock Buzz) cut their annual forecasts, hammering automakers and helping push shares lower. The euro hit a two-week low against the dollar as the increasingly gloomy outlook cooled any expectations the European Central Bank would raise interest rates.

The euro eased 0.24 percent at $1.5649.

"Everywhere we look this morning we see crystal clear evidence that it's not different this time and that weakness in the U.S. economy is rapidly spreading around the globe," said William O'Donnell, head of U.S. interest rate strategy at UBS Securities in Stamford, Connecticut.

Post-earnings brokerage downgrades of Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz), down 6.5 percent, McDonald's Corp (MCD.N: Quote, Profile, Research, Stock Buzz), off 1.3 percent and AT&T (T.N: Quote, Profile, Research, Stock Buzz), off 3.5 percent, added to the economic headwinds.