European, US equities dip on Chinese economic gloom

Europe's main stock markets and US stocks fell Monday after losses across most of Asia on poor Chinese data and a drop in oil prices.

Frankfurt, London and Paris ended the day down around half of one percent, as investors eyed sliding share prices in Shanghai and Hong Kong, and declining oil prices.

Most Asian bourses sank after a key gauge of Chinese factory activity hit a more than three-year low, but Tokyo's Nikkei index soared after Japan's decision to slash some interest rates to negative.

Stock markets around the world had rebounded before the weekend, ending a volatile month with a bang after the Bank of Japan's shock announcement.

"Ever-worsening manufacturing numbers from China along with a pullback from crude oil is reversing the bullish sentiment we saw last week," said analyst Manoj Ladwa at broker TJM Parners.

US stocks dropped on Monday with the Dow Jones Industrial Average at 16,413.19, down 0.32 percent around noon in New York.

The broad-based S&P 500 shed 0.27 percent, while the tech-rich Nasdaq Composite Index lost 0.26 percent.

Oil prices dipped Monday as the rally sparked by prospects of a cut to the global supply glut faded. Analysts cautioned against putting too much hope on talks between non-OPEC crude producer Russia and the cartel on reducing output in a move that could support prices.

- Chinese fortunes -

In another example of weakness in China's economy, the official Purchasing Managers Index showed its manufacturing sector shrank in January for the sixth straight month and was now at its weakest since August 2012.

A separate reading from China?s financial magazine Caixin showed a minor improvement but also pointed to contraction.

"While the January PMIs were a little subdued, we still expect the fortunes of China?s economy to improve during the course of this year," said analyst David Rees at Capital Economics.

Still, economist Jeremy Cook at traders World First pointed out "that deterioration is the sixth month in a row -- the worst on record."

Worries about the slowdown in the world's second biggest economy -- and its leaders' handling of it -- were among the key reasons for a rout across global markets in January that wiped trillions of dollars off valuations.

"Investors are still banking on Chinese policymakers to pull out all the stops and provide momentum for growth," noted Rebecca O'Keeffe, head of investment at stockbroker Interactive Investor.

Traders meanwhile cautioned that trading would remain muted in Asia this week ahead of the Chinese lunar New Year holiday.

Shanghai ended 1.8 percent lower on Monday and Hong Kong closed down 0.5 percent.

However, Tokyo soared two percent, extending a 2.8-percent gain on Friday following the shock announcement from the BoJ that it would effectively start charging lenders to park their cash with it.

The move was intended to expand lending to people and businesses in order to kickstart the economy and fend off deflation.

Adding to the upward pressure in the Japanese market was a 12.4-percent surge in Sony, which on Friday posted a nine-month net profit of almost $2.0 billion thanks to huge demand for its PlayStation video games console and image sensors.

- Key figures at 1630 GMT -

London - FTSE 100: DOWN 0.39 percent at 6,060.10 (close)

Frankfurt - DAX 30: DOWN 0.41 percent at 9,757.88 (close)

Paris - CAC 40: DOWN 0.56 percent at 4,392.33 (close)

EURO STOXX 50: DOWN 0.79 percent at 3,021.01 (close)

Tokyo - Nikkei 225: UP 2.0 percent at 17,865.23 (close)

Shanghai - Composite: DOWN 1.8 percent at 2,688.85 (close)

Hong Kong - Hang Seng: DOWN 0.5 percent at 19595.50 (close)

New York - Dow: DOWN 0.32 percent at 16,413.19

Euro/dollar: UP at $1.0888 from $1.0831 Friday

Dollar/yen: DOWN at 121.08 yen from 121.12 yen