World shares fell on Thursday as confirmation that Europe is slowly dragging itself out of recession failed to offset worries about China's slowdown and its impact on corporate earnings.
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Data showing better German business morale and the British economy gathering pace came in line with expectations and still pointed to only modest growth ahead, so did little to spark fresh demand from investors worried about developments in Asia.
"We don't expect a strong recovery in Europe," said Philippe Gudin de Vallerin, head of European economics research at Barclays. "Risks are also coming from China where we have seen further evidence of its economy slowing."
Germany's influential Ifo think tank said business morale in Europe's largest economy had improved for a third straight month in July thanks to higher exports and consumer demand.
Britain then reported its economy had grown 0.6 percent between April and June compared with the previous three months, and by 1.4 percent from the same period a year ago - its best performance since early 2011.
A surprise drop in Spain's unemployment rate - the first for two years - added to signs its long recession is bottoming out.
After the data, the euro was mostly steady at around $1.32 and German Bond futures were virtually flat.
Share markets were losing ground after a recent strong run upwards as investors fretted about mixed results from blue-chip companies and ongoing worries about China's slowdown.
Europe's broad FTSEurofirst 300 index <.FTEU3> had fallen 1 percent by 1000 GMT as it retreated from eight-week highs. BASF, the world's largest chemical company, was among the biggest losers, citing the slowdown in China as a particular concern.
"The Chinese growth engine is no longer running at full power," the German firm said, adding that it would have to slow the pace of new staff additions in all emerging markets.
Data on Wednesday showed manufacturing in China running at an 11-month low in July, complicating the government's efforts to shift the economy away from its heavy reliance on exports, and heightening fears of a sharp drop in growth.
Chinese stocks suffered their second straight loss on Thursday despite measures from the government to spur the economy, including help for exports and railway investment.
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> dropped 0.3 percent from the previous day's seven-week closing high, to leave the MSCI world equity index <.MIWD00000PUS> 0.5 percent down.
U.S. stocks looked set to open lower on Wall Street after a difficult session on Wednesday, when the benchmark S&P 500 <.SPX> logged its first back-to-back declines in a month. <.N>
Worries about China were also reflected in commodity markets where copper fell 0.5 percent to $7,023 a tonne, ending a five-day run-up that had taken the metal to a one-month high.
Brent crude oil fell for a second day, down 60 cents to $106.59 a barrel, after settling on Wednesday at its lowest since July 4.
"We think that China is going to continue to be under a bit of pressure and that could weigh on the base metals market a bit more," said Natalie Rampono, commodity strategist at Australia and New Zealand Banking Group.