GLOBAL MARKETS-Shares plunge as U.S. slowdown adds to EM woes

    * MSCI Asia ex-Japan tumbles to new five-month low 
    * Nikkei sheds more than 4 pct to log worst day since June 
    * Dollar touches two-month low against yen 
    * Aussie rallies after RBA drops easing bias, holds steady 
 
    By Marc Jones 
    LONDON, Feb 4 (Reuters) - World shares slumped to a near 
four-month low on Tuesday as signs the U.S. economy was 
stuttering compounded already frayed nerves following a sharp 
sell-off in emerging markets. 
    A weaker-than-expected report on U.S. factory activity hurt 
global equity markets and the dollar on Monday and left 
investors scurrying for traditional safe-haven assets such the 
U.S. and German government bonds and the Japanese yen. 
    It had been another torrid Asian session as traders 
returning from Lunar New Year holidays got up to pace with the 
sell-off and European markets looked in no mood to deviate from 
the downward course. 
    New falls on all the major bourses saw the pan-European 
FTSEurofirst    start down 0.5 percent, although it was 
looking almost rosy compared with MSCI's main emerging market 
index   . 
    It was down another 1.4 percent having fallen 12 percent 
over the last two months, while MSCI's 45 country all world 
index    dropped to its lowest since early October. 
    "It does look as if developed market equities are playing 
catch up with emerging markets," said Societe Generale 
strategist Kit Juckes. 
    "The dollar has somewhat run out of steam and I suspect the 
focus today may well be on yen strength as well as how much 
further the equity market falls can go." 
    German government bonds   , considered to be one 
of Europe's most secure investments, saw prices hit a 6-month 
high while most of the rest of the region lost ground. GVD/EUR  
    Despite a sharp jump in Australia's dollar    after its 
central bank appeared to shut the door on further rate cuts, the 
main focus of the currency market remained the greenback's 
fading influence over the yen. 
    Two factors were at play. First, the fall in U.S. bond 
yields due to the weak data had knocked the dollar. But also a 
fresh 4 percent on Tokyo's Nikkei stock market    overnight 
had pushed up the yen. The Nikkei often appears to be on a 
see-saw with the yen, as one goes up the other goes down. 
    The U.S. dollar was last up 0.2 percent at 101.16 yen    
staying above Monday's low of 100.77 yen, its lowest level 
against the Japanese currency since Nov. 21. The euro was at 
$1.3509, held back by talk the ECB could ease policy this week. 
  <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 
   Asset returns last 12 months http://link.reuters.com/huq75s 
   EM 2014 FX performance       http://link.reuters.com/jus35t 
   Currencies v dollar          http://link.reuters.com/tak27s 
   Yen vs Nikkei                http://link.reuters.com/cuz62v 
  ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
     
    10 PERCENT CORRECTION? 
    The stock market sell-off saw the VIX   , a favoured 
gauge of market nervousness, jump to its highest since June. It 
also boosted safe-haven appeal of gold, with spot gold    
steady on the day at $1,258.84 an ounce, after gaining 1.1 
percent on Monday. 
    But three-month copper on the London Metal Exchange   , 
a metal highly attuned to global growth, edged down to $7,020 on 
track for its 10th straight losing session, it longest run of 
falls in 37 years. 
    The Nikkei's latest 4 percent dive cemented its position as 
2014's worst performing major market. It has shed 14 percent of 
last year's 50 percent boom. The U.S. benchmark S&P 500    
and FTSEurofirst 300    are down 5.8 and 3.3 percent 
respectively.     
    "With the main European indices down around 7 percent (since 
peaks), chatter on trading desk is about whether we are in for a 
'10 percent' correction," Jonathan Sudaria, a dealer at Capital 
Spreads in London, said in emailed comments. 
    "The bears have a seemingly easy target within reach and the 
remaining bulls will want to get out of the way." 
    Among other perceived safe assets, the yield on benchmark 
10-year U.S. Treasury notes    stood at 2.604 in early 
European trading, after falling as low as 2.582 percent, its 
lowest since Nov. 1. 
    The dollar's overnight weakness also provided some relief to 
emerging market currencies. Turkey's lira   , Russia's 
rouble   , Hungary's forint    and the South African 
rand    all edged higher. 
    "Experienced emerging market investors would be looking at 
this sell down with great interest, looking to pick up quality 
names on the dip, but they are still in the minority for now," 
said Erwin Sanft, Standard Chartered's Hong Kong-based China 
equity strategist. 
 
 (Additional reporting by Clement Tan in Hong Kong; Editing by 
Elizabeth Piper) 
 ((lisa.twaronite@thomsonreuters.com)(+81 3 6441 1870 Reuters 
Messaging: lisa.twaronite.thomsonreuters.com@reuters.net)) 
  
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Keywords: MARKETS GLOBAL