Asian and European manufacturing output growth cooled further in June, with China hitting its slowest pace in more than a year -- further evidence that the global economic recovery is moderating.
A separate report Thursday showed big Japanese manufacturers unexpectedly turning optimistic through mid-June, but analysts are fretting over the outlook, particularly given turmoil in markets since and a rise in the yen.
Stock markets and commodity prices fell in Asia after a major survey of Chinese purchasing managers added to concerns over the global outlook. They remained under pressure in Europe, down seven out of the past eight trading sessions.
Wall Street has just rounded off its worst quarter since the market meltdown in 2008 triggered by the collapse of U.S. investment bank Lehman Brothers.
But economists played down worries of a precipitous slowdown in China, which has been powering the world economy in its recovery from recession, and said the risk of a double-dip recession in industrialized Western economies remained low.
Fears about hard-landing are overplayed, said Qu Hongbin, chief economist for China at HSBC, though he noted that government steps to cool the property market and curb bank lending appeared to be having an effect on manufacturing too.
HSBC's China Purchasing Managers' Index fell to a 14-month low of 50.4 -- just above the 50 mark that divides expansion from contraction -- from 52.7 in May, with both output and new orders dropping outright for the first time since the depths of the global downturn in March 2009.
Yet Qu predicted China would achieve around 9 percent growth in the second half, underpinned by massive investment and robust private consumption, after posting annual growth of 11.9 percent in the first quarter.
Elsewhere in Asia, manufacturing growth in India eased from a two-year peak last month, while the pace of growth for South Korean factories fell to a six-month low, similar surveys showed Thursday.
In the euro zone, manufacturing slowed in June to its weakest growth rate in four months, with frailty most notable in laggard Spain and offset by still-strong output growth from Europe's largest economy Germany.
News that the European Central Bank lent banks 111.2 billion euros in six-day funds Thursday as banks repaid close to half a trillion euros in emergency 12-month funds loaned out a year ago eased some of markets' fears over banks but underscored the ongoing need for emergency funds.
Economists were not sounding alarm bells about risks of a hard landing in Europe either, although it appears clear that growth likely peaked in the quarter just ended and that interest rates will remain on hold well into next year.
In a lot of Western economies you're going to see the pace of economic growth come off in the second half of the year. That's the way we're headed, said Mark Miller, international economist at Lloyds TSB Corporate Markets.
For continental Europe, exports are still a driver of growth and I don't know how much longer that can continue.
In Britain, manufacturing output appeared in slightly better health than the rest of Europe, although it too slowed from a 15-year high clocked in May. Export orders growth dropped sharply, reflecting continental Europe's malaise.
A similar survey for the United States is due later on Thursday and like Europe and the UK, it is expected to show the pace output growth slowed to a more modest rate.
A flurry of weak U.S. economic data in recent weeks and persistent worries about the fiscal health of peripheral euro zone countries have helped drag the MSCI world equity index
down more than 10 percent since April.
Though economists do not expect a slide back into a global recession, some are worrying that much of the developed world may see a prolonged period of only sluggish growth.
Underscoring the uneven nature of the global recovery that is vexing investors, Russian manufacturing expanded in June at the fastest rate since April 2008.
And in Sweden, the Riksbank raised its main policy rate by 25 basis points to 0.50 percent Thursday.
Convinced that a sustained recovery from the global downturn will fuel inflationary pressures, central banks in Canada, Australia, Norway, India, Malaysia, New Zealand and Taiwan have already begun to raise interest rates.
(Writing by Ross Finley and Kazunori Takada; Editing by Mike Peacock)