Stock markets worldwide fell on Tuesday after weak Chinese and British factory data rekindled fears of slowing global growth, sending benchmark Treasury yields to nearly two-week lows.
Activity at China's factories shrank for the 14th straight month in April as demand stagnated, a private survey showed. The data contributed to a drop in oil prices on worries over demand, given the country's status as a major oil importer.
Britain's manufacturing output last month also unexpectedly shrank to hit its lowest level in three years.
US shares gave back Monday's gains. The drop in oil prices helped push the S&P 500 energy index down 2.24 per cent, making it the leading decliner among the 10 major S&P sectors.
“There are some concerns about the China impacts on the global economy,” said Macrae Sykes, analyst at Gabelli & Co Inc in Rye, New York. He also said the drop in commodity prices removed support from US equities.
European shares fell to three-week lows, with Germany's Commerzbank leading the decline after a slump in profits, while the weak Chinese factory data pushed down mining companies. European banking shares ended down 3.68 per cent.
Worries about the health of the global economy helped push yields lower and boosted prices on safe-haven US government debt. A surprise interest rate cut in Australia also raised concerns about central banks' ability to boost sluggish growth, which in turn contributed to lower US yields.
MSCI's all-country world equity index, was last down 4.65 points, or 1.15 per cent, at 399.52.
The Dow Jones industrial average closed down 140.25 points, or 0.78 per cent, at 17,750.91. The S&P 500 ended down 18.06 points, or 0.87 per cent, at 2,063.37. The Nasdaq Composite closed down 54.37 points, or 1.13 per cent, at 4,763.22.
Europe's broad FTSEurofirst 300 index ended down 1.74 per cent at 1,318.91.
Yields on US Treasuries maturing between five and 30 years hit their lowest levels since April 20, with benchmark 10-year yields hitting a session low of 1.782 per cent. Two- and three-year yields hit their lowest levels in more than two weeks, at 0.742 per cent and 0.888 per cent, respectively.
“I think people are realising monetary policy is at its maximum point... and growth doesn't look like it's accelerating,” said Priya Misra, head of global rates strategy at TD Securities in New York.
In addition to concerns over demand, rising oil output contributed to declines in prices. Output from the biggest oil producers in West Asia jumped last month or could surge in the near term, data showed this week.
US crude settled down 2.52 per cent at $43.65 a barrel, while Brent crude settled down 1.88 per cent at $44.97 a barrel.
The dollar hit an 18-month low of 105.55 yen on doubts the Bank of Japan would intervene to stem the yen's dramatic rise, which has undermined attempts to reflate the developed world's third-biggest economy.
US gold futures for June delivery settled down 0.3 per cent at $1,295.80 an ounce.