Weaker-than-expected European economic data sent the region's shares and the euro into reverse on Friday, as hopes of a quick recovery by the struggling bloc were left looking fragile.
Disappointing German manufacturing sector figures overshadowed a small pick-up in the wider euro zone purchasing manager index, data which polls around 5,000 businesses across the 17-nation bloc and is viewed as a reliable growth indicator.
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The German manufacturing sector slipped to 46.3 in December from 46.8 the previous month, remaining well below the 50 threshold that divides growth from contraction and missing the consensus forecast in a Reuters poll for 47.2.
It saw European shares <.STOXX50E> drop back to a near-flat 2628.56 points. By 4:30 a.m. ET London's FTSE 100 , Paris's CAC-40 and Frankfurt's DAX were down between 0.1 and 0.2 percent having all opened in positive territory.
"All in all, the picture for the EMU (euro zone) economy has not changed much after today's data," said Annalisa Piazza, an economist at Newedge Strategy.
"EMU GDP is expected to continue to contract in Q4-12 and there are no signs of improvement for the first part of next year."
Following a mixed session for Asian equities, the MSCI index of global stocks <.MIWD00000PUS> was down fractionally at 336.73 points, following a 6 percent rise over the last three weeks.
In the currency market, the PMI data also saw the euro lose its early momentum and slide back below $1.31.
Mirroring the move, German government bonds clawed back into the black having dipped during early trading. By 4:20 a.m. ET German bunds were up 4 ticks at 145.11.
The news was not all gloomy, however. After more than eight hours of late-night talks at a summit in Brussels, EU leaders promised to push ahead with a pan-euro zone mechanism to wind down problem banks.
It is something many crisis observers believe could help finally break the toxic link between troubled banks and the crippling impact their bailouts typically have on national finances.
A deteriorating business sentiment survey and expectations that the Bank of Japan will ease policy further to support the weak economy next week pushed the yen to a near 9-month low against the dollar and an 8-month low against the euro.
China shares outperformed Asian peers after the HSBC flash purchasing managers' index for December hit a 14-month high of 50.9, the fifth straight monthly gain, underlining the world number two economy's improving growth prospects.
The data help lift commodity markets, with copper and oil both edging up, albeit staying within their tight recent ranges.
"We're seeing positive (China) PMI, industrial data and they are all pointing to the direction of an economic recovery," said Sijin Cheng, a commodities analyst at Barclays Capital.
(Additional reporting by Sudip Kar-Gupta; editing by Philippa Fletcher)