Europe's main stock markets slid Thursday as poor European and Chinese manufacturing data eclipsed news of the Spanish government's successful long-term bond auction, dealers said.
London's FTSE 100 index of top companies dropped 0.57 percent to 5,854.64 points, while in Paris the CAC 40 shed 0.62 percent to 3,509.92 points and in Frankfurt the Dax 30 ended the day down just 0.02 percent to 7,389.49 points.
Milan dropped 1.68 percent Madrid's IBEX 35 sank 0.95 percent as the Spanish government's successful bond auction failed to dispel market fears that the debt-plagued eurozone nation was heading for a bailout.
Spain borrowed 4.799 billion euros in bond auctions on Thursday, paying sharply reduced interest rates for the critical long maturity of 10 years.
The European single currency dropped to $1.2946 from $1.3049 late in New York on Wednesday, pressured by weak eurozone business activity data while the greenback was also boosted by safe-haven demand, traders said.
The dollar dipped against the yen, buying 78.27 yen compared to 78.36 on Wednesday
Gold slid to $1,758.50 at London's evening fixing from $1,766.75 on Wednesday evening.
Spain, fighting to avoid having to seek rescue funding, placed its 10-year bonds at an average rate of 5.666 percent, down from 6.647 percent at the last such auction on August 2.
A rate below 6.0 percent is considered important for Spain, since borrowing costs above this level are seen as unsustainably expensive.
Borrowing rates for eurozone countries in trouble have fallen sharply on the market for existing government debt since the European Central Bank said on September 6 that it would buy unlimited quantities of eurozone debt.
But the ECB said that such help would depend on the countries concerned appealing for rescue funding and accepting consequent conditions for structural reforms, which Spain is reluctant to do.
Analysts said Thursday's bond auction would ease the pressure on the nation's Prime Minister Mariano Rajoy -- for the time being.
"Spain's bond auction today was overall a pretty good result for Rajoy," said Spreadex trader Simon Furlong.
"With better demand than the previous auction and a lower yield, Rajoy can put off a request for a bail out for a little longer.
"However, Europe has not reacted particularly favourably to the news, as 5.666 percent is still extremely high. Unless Spain starts to pay drastically lower bond yields, a bailout is inevitable," Furlong added.
Mike McCudden, head of derivatives at online brokerage Interactive Investor, said European investors were only "momentarily distracted" by the Spanish bond auction which passed in line with expectations.
"Right now, the focus of traders attention remains with concern over the Asian markets," he told AFP.
Asian equities plunged on news that Chinese manufacturing activity contracted again in September, adding to concerns about the economic giant, while enthusiasm waned over the Bank of Japan's economic stimulus package.
Shanghai tumbled 2.08 percent to close at 2,024.84 points -- its lowest since February 2009, at the height of the global financial crisis.
Hong Kong slid 1.20 percent, Tokyo shed 1.57 percent, Seoul lost 0.87 percent and Sydney finished 0.48-percent lower.
Chinese manufacturing activity contracted for an 11th straight month in September, according to HSBC's preliminary Purchasing Managers Index (PMI) that was published on Thursday.
The survey adds to long-running worries about the world's number-two economy, which has seen its key export sector pummelled by shrinking demand in the crucial European and US markets.
HSBC said the PMI for this month hit 47.8, a mild improvement from a final reading of 47.6 in August. However, a reading below 50 indicates contraction, while anything above 50 shows growth. The final results will be released on September 29.
Adding to downbeat sentiment in Japan were figures showing the economy recorded its second straight monthly trade deficit in August owing to slipping exports caused by a worldwide slowdown.
There was also more gloom in the eurozone, where private sector business activity showed an eighth monthly decline in September, hitting its gloomiest patch in three years, according to survey results published on Thursday.
The closely-watched Purchasing Managers Index (PMI), a survey of 5,000 eurozone businesses compiled by Markit research firm that is a key forward-looking indicator, came in at 45.9 points, down from 46.3 in July.
While the rate of contraction in Germany eased, it accelerated markedly in France.
US stocks also traded lower on the weak Chinese manufacturing data.
In midday trade, the Dow Jones Industrial Average was down 0.10 percent to 13,564.42 points.
The S&P 500-stock index lost 0.29 percent to 1,456.85 points, while the tech-heavy Nasdaq dropped 0.36 percent to 3,171.26 points.