* U.S. and European shares fall, oil rebounds after slump
* Chinese data shows manufacturing contracts for 11th month
* Dollar rises broadly; euro falls on crisis woes
* Spain bond yields fall at auction to lowest since January
By Ryan Vlastelica
NEW YORK, Sept 20 U.S. and European stocks fell
on Thursday and the euro weakened, after data showing
contractions in Chinese and euro zone manufacturing and signs of
a struggling U.S. economy underlined worries about global
Crude oil rose after three days of steep losses, helping
equities recover from session lows as energy shares rose. Still,
the price of Brent remains down 6 percent on the week on
concerns about demand prospects.
U.S. manufacturing closed out its weakest quarterly growth
rate in three years this month, according to data on Thursday.
Contraction in factory activity in the U.S. mid-Atlantic region
for a fifth straight month in September also drove home the weak
tone that overhangs the U.S. economy.
World shares and other risk markets have lost momentum this
week as investors take stock after the central banks of the
United States, Japan and the euro zone outlined plans for
economic stimulus, contributing to a near 17 percent rise in the
MNSI global index since June.
Markets are grappling with whether prices ran " ahead of
themselves a little bit too fast," said Philip Wagner, senior
vice president at Bryn Mawr Trust in Devon, Pennsylvania. "You
look at the data here today, specifically, nothing is a positive
surprise so it doesn't really give the bulls more enthusiasm."
The Dow Jones industrial average was down 10.38
points, or 0.08 percent, at 13,567.58. The Standard & Poor's 500
Index was down 3.62 points, or 0.25 percent, at 1,457.43.
The Nasdaq Composite Index was down 11.02 points, or
0.35 percent, at 3,171.60.
European equities closed 0.1 percent lower, and the
MSCI world index shed 0.7 percent.
"For now, this is a pause in the rally, not the start of a
correction. Investors are taking a breather. Indexes are testing
key support levels and they are holding," FXCM analyst Nicolas
Hong Kong's Hang Seng index lost 1.2 percent.
In the currency market, the euro fell 0.8 percent
while the U.S. dollar index rose 0.6 percent.
The euro was pushed further from last week's 4-1/2-month
high, hitting a one week low of $1.294 before a small recovery.
Demand for safe-haven assets rose, pushing up the benchmark
10-year U.S. Treasury note price by 2/32, with the
yield at 1.7648 percent.
The euro zone purchasing managers index data underlined the
effect of the bloc's debt crisis. The composite PMI, which
combines data from the manufacturing and services surveys, fell
to 45.9 from 46.3 in August, its lowest since June 2009. A
figure below 50 indicates contraction.
Of the European national PMIs, Germany managed to show
improvement, with the manufacturing PMI hitting its highest
level since March, but still at a level indicating contraction.
China's flash purchasing managers index prompted the initial
market gloom as it remained below 50 for an 11th month in a row.
"Global growth worries have returned to the surface. It's
weighing once again on investor confidence and giving a boost to
both the dollar and yen," said Joe Manimbo, senior market
analyst at Western Union Business Solutions in Washington.
Spain's 10-year borrowing costs fell to their lowest level
since January at a debt auction on Thursday, although the relief
may be brief as Prime Minister Mariano Rajoy hesitates over
seeking an international bailout that would open the way for the
European Central Bank to buy Spanish government bonds.
German government bonds, favored by risk averse investors,
remained in demand. Bund futures were up 0.3 percent to
140.17, adding to the rebound seen in a week where they began at
a 5-1/2-month low.
Brent crude prices rose 1.4 percent to $109.64.
Prices had fallen recently after Saudi Arabia promised to boost
supply. Spot gold, which is at its highest in over half a
year, dropped modestly to $1,767.86 an ounce.
Problems in Greece are back in focus after wrangling between
Athens and inspectors from the European Commission, the ECB and
the International Monetary Fund over ways to stabilize the
country's debts. The head of one of Germany's biggest banks,
Commerzbank, warned on Thursday he thought another Greek debt
restructuring would be needed.
China's weak data were felt widely across Asian and
commodity markets. Metals slipped with copper down over 1.5
percent and the Australian dollar, highly sensitive to its
biggest export partner, slipped 0.8 percent.