Concerns over a slowdown in China's economy triggered a third day of falls for world shares on Monday and extended a spritely rebound in gold to leave it at a near three-week high.
Asian shares had fallen to a three-week low after growth in China's services sector slowed sharply last month, and Tokyo's Nikkei <.N225> had endured a rocky first day of 2014 trading as the jitters prompted its biggest drop in over two-months.
European markets were digesting a raft of services sector data that shed additional light on the divergence between top economies Germany and France as well as the gradual recovery in Italy and Spain.
The pan-regional FTSEurofirst 300 <.FTEU3> had opened on the back foot following the difficult day in Asia and the data left London's FTSE <.FTSE>, Paris's CAC 40 <.FCHI> and Frankfurt's Dax <.GDAXI> down between 0.1 and 0.2 percent.
Safe-haven European bonds made early ground amid the uncertainty, while in the currency market the dollar hovered near a four-week high as it also benefited from Friday's upbeat view for the United States from Federal Reserve chief Ben Bernanke.
Philippe Gudin de Vallerin, head of European economics research at Barclays, said the euro zone PMI data underscored two trends going on in the region.
"It has confirmed there is a growing divergence between Germany and France... And the second one is on Spain on Italy. There are some ups and down but more or less the trend is confirmed and the trend is an upward one."
Concerns that China's powerhouse economy is slowing remained the main thorny issue for markets though after growth in its services sector slowed sharply in December to its lowest point since August 2011.
The figures followed a similar official survey on Friday and two other PMIs last week that showed factory activity also soured.
China's CSI300 share index <.CSI300> sagged 2.3 percent on Monday, hitting a five-month low and MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> slid 0.8 percent to a three-week trough.
The Chinese index is now down 3.9 percent since the start of the year, adding to last year's 7.6 percent decline.
"The focal point of the Asian markets is more on Chinese growth and on Chinese political situation and how it's going to pan out this year, rather than worrying about (U.S.) tapering," said Guy Stear, Asian credit and equity strategist at Societe Generale in Hong Kong.
The main beneficiary of the Asian tensions remained gold as it continued to rebound from last year's worst run in over three decades.
After the initial flurry of dealing in London it was sitting at $1,240 an ounce, it's highest in three weeks and on course for a fifth day of back-to-back gains.
"Weaker equities will have more of an impact on gold prices than a stronger dollar," said Helen Lau, an analyst at UOB-Kay Hian Securities in Hong Kong. "It is all about allocation by funds."
On the opposite side of the China coin was the South Korean won as it hit a near six-week low. Ongoing political uncertainty in Thailand also left the baht at a near four-year trough and Thai stocks <.SETI> at a 16-month low.
With Japanese equities taking a beating, the yen got some respite against the dollar, up 0.3 percent at 104.55 yen, not far from a two-week high of 104.08 yen touched last Friday. The euro edged back above $1.36 after it had slumped to a five-week low.
Wednesday's December Fed meeting minutes and then Friday's non-farm payrolls data will give further clues on how quickly the Fed could unwind the stimulus that has been a major driver for global risk assets in the past few years.
"With the Fed having set the tapering process in motion, it would likely take a fairly significant miss to derail tapering expectations and push yields significantly lower from their year-end levels," analysts at BNP Paribas wrote in a note.