Global mkts: Growth fear scythes stocks

Sluggish U.S. and global manufacturing data on Monday added to concerns about the world economic recovery, while concerns that Spain and Italy will be the next victims of the euro zone crisis drove benchmark government bond yields to 14-year highs.

An 11th-hour deal to raise the U.S. debt ceiling cleared its biggest hurdle in the House of Representatives, staving off the prospect of a default. But fears persisted that Washington could still lose its triple-A credit rating.

Figures on Monday showing U.S. manufacturing grew at its slowest pace in two years in July prompted investors to unwind risky positions and buy safe-haven assets including German government bonds, the yen and Swiss franc.

It looks like investors have just forgotten about the debt ceiling deal in Washington and instead are focusing on the economic data, which was clearly weaker than anticipated, said Bill McNamara, analyst at Charles Stanley.

The uptrend is clearly over.

MSCI's world equity index fell 0.7 percent on the day, to its weakest since June 28. The benchmark index is almost flat since January.

European stocks hit a 10-month low while Italian shares fell to 27-month troughs.

The fear of the market is that the world is going into recession again... and in the euro zone the peripheral markets are

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