World stocks turned lower and European currencies fell on Tuesday after data showed the euro zone economy shrank more than previously thought, fanning concerns about the impact on corporate profits from the economy.

Gross domestic product in the euro area contracted 1.6 percent in the fourth quarter from the previous three months, rather than the previously reported 1.5 percent.

UK manufacturing output fell 0.9 percent in February, less than expected but marking the 12th straight month of declines, the longest stretch of losses since early 1980s.

World stocks, measured by MSCI <.MIWD00000PUS> slipped after a month-long run pushed them to a two-month high on Monday.

The drop in the euro zone GDP is deepest ever quarterly fall and was brought on by a collapse in external trade, fanning concerns about the impact on corporate profits just as a U.S. corporate earnings season kicks off later on Tuesday.

Worryingly, it is far from inconceivable that euro zone GDP contraction was even deeper in the first quarter... given largely dire data and survey evidence, said Howard Archer, chief European economist at IHS Global Insight.

This will hopefully have marked the low point in the downturn, although recovery currently still looks some way away.

The MSCI equity index fell 0.7 percent while the FTSEurofirst 300 index <.FTEU3> lost 1 percent. Emerging stocks <.MSCIEF> dropped 1 percent.

U.S. crude oil erased early gains, falling 1.7 percent to $50.26 a barrel.

The June bund futures rose 11 ticks.

The euro fell 0.9 percent to $1.3280, hitting session lows after the data, while sterling lost 0.8 percent to $1.4631.

The yen rose 0.7 percent to 100.37 per dollar.

Earlier, the Bank of Japan left interest rates on hold at 0.1 percent and unveiled plans to lend against a wider range of municipal debt in a move to ease a domestic credit crunch.

Japan is also set to announce a new economic stimulus package worth more than 2 percent of GDP on Friday as the country grapples with its worst recession since World War Two.

The new package will add around $100 billion to spending already planned under previous measures.

The dollar <.DXY> rose 0.7 percent against a basket of major currencies.

Data is meager and FX markets are trading in the wake of stock markets, which is likely to continue going into the long weekend, said Frankfurt-based Commerzbank currency strategist Antje Praefcke.

(Additional reporting by Jessica Mortimer; Editing by Victoria Main)