GLOBAL MARKETS-Shares slump as U.S. slowdown joins emerging-market woes

    * MSCI world index slides to near 4-month low 
    * European shares pare losses; Nikkei has worst day since 
June 
    * Dollar bobs higher from two-month low against yen 
    * Aussie rallies after RBA drops easing bias 
 
    By Marc Jones 
    LONDON, Feb 4 (Reuters) - World shares slumped to near a 
four-month low on Tuesday as signs of a slowdown in the U.S. 
economy aggravated the anxiety caused by a sell-off in emerging 
markets. 
    A report showing U.S. factory activity was weaker than 
expected had caused both the dollar and global equities to fall 
on Monday. European investors remained anxious on Tuesday after 
another session of sustained selling in Asia. 
    Futures prices pointed to a 0.3 percent rebound for Wall 
Street later, but a mid-morning attempt at a stabilisation 
failed in Europe. The benchmark FTSEurofirst index    fell 
0.4 percent and headed for a third day of declines. And Europe 
looked almost rosy compared with Asia.  
    Tokyo's Nikkei    plunged 4 percent in its worst day 
since June, cementing its position as the worst performer in 
developed markets in 2014. MSCI's emerging-market index 
   dropped 1.4 percent, putting its losses since late 
October at almost 12 percent. 
    "It does look as if developed-market equities are playing 
catchup with emerging markets,"  Societe Generale strategist Kit 
Juckes said. "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." 
    With a flight to safety going on, German government bonds 
  , considered to be one of Europe's most secure 
investments, saw prices hit a 6-month high. Debt from elsewhere 
in the region lost ground.  GVD/EUR  
    The Australian dollar    jumped after its central bank 
appeared to shut the door on further rate cuts. But the main 
focus of the currency market remained the U.S. dollar's contest 
with the yen. 
    Two factors were at play. U.S. bond yields fell after the 
weak data hit the dollar, and the Nikkei's plunge pushed up the 
yen. The Nikkei and yen often see-saw: as one goes up, the other 
goes down. 
    The U.S. dollar appeared to be recovering, though. It was 
last up 0.3 percent at 101.27 yen   , after hitting its 
lowest level since November on Monday at 100.77. 
    Another round of strong UK construction data also left 
sterling looking spritely    at $1.6340. Talk of policy 
easing by the ECB at its monthly meeting on Thursday held the 
euro back at $1.3509.    
   <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 
   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 left MSCI's 45-country, all-world 
index at its lowest since October and saw the VIX   , the 
market's fear seismograph, jump to its highest since June.  
    It also boosted the safe-haven appeal of gold. Spot gold 
   was steady on 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. 
That put it on track for its 10th straight losing session and 
its longest run of falls in 37 years. 
    The Nikkei's 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. By comparison, the U.S. benchmark S&P 
500    is down 5.8 percent. The FTSEurofirst 300    
fell 3.3 percent.     
    "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 2.602 as U.S. 
trading loomed. It fell as low as 2.582 percent on Monday, 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 Lisa Twaronite in Tokyo; Editing by 
Larry King) 
 ((marc.jones@thomsonreuters.com)(+44)(0)(207 542 9033)(Reuters 
Messaging: marc.jones.thomsonreuters.com@reuters.net)) 
  
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Keywords: MARKETS GLOBAL