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World stocks, oil down after weak factory data

NEW YORK - Stocks on major markets fell and crude oil prices slumped $2 a barrel on Thursday after data showed Chinese, European and US manufacturing activity slowing further, just a day after the Federal Reserve extended its monetary stimulus program.

The US dollar rose against the euro and yen as the Fed’s move disappointed investors who had hoped it would opt for a more aggressive policy.

Business activity across the euro zone shrank for a fifth straight month in June and Chinese manufacturing contracted, while weaker overseas demand slowed US factory growth, surveys showed on Thursday. The data darkened the outlook for the world economy, adding to fears that Europe’s debt crisis and slower growth in the United States and Asia would cause downturns around the globe. “The genesis is Europe and it’s starting to flow through everything now. Business has slowed down,” said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

The Dow Jones industrial average was down 76.67 points, or 0.60 percent, at 12,747.72. The Standard & Poor’s 500 Index was down 11.53 points, or 0.85 percent, at 1,344.16. The Nasdaq Composite Index was down 30.04 points, or 1.03 percent, at 2,900.41.

MSCI’s global equity index declined 1.2 percent, with European shares was down 0.4 percent.

The Fed on Wednesday chose to extend its bond-buying program, dubbed “Operation Twist”, rather than implement more quantitative easing as some had hoped.

The US central bank made its decision after lowering growth and employment forecasts for the world’s largest economy in 2012 and 2013. It said it would consider more stimulus measures if the situation worsened.

In Europe, preliminary manufacturing and service sector data across the 17-nation euro area showed the downturn in the region was becoming entrenched as falling new orders and rising unemployment hit business confidence.

The survey data also showed that Germany’s private sector shrank in June for the second month running, with manufacturing activity hitting a three-year low.

A similar survey of private sector activity in China, compiled by HSBC, found its factory sector had shrunk for an eighth straight month in June on weaker demand for exports.

Economic growth in the world’s most populous nation is widely expected to have slowed for a sixth straight quarter in April through June as the country feels the impact of the euro area debt crisis and property controls weigh on domestic demand.

In the oil market, Brent crude was down to $90.67 a barrel, off $2.02 from Wedneday’s settlement. US crude traded down $2 to $79.45 a barrel.

The US dollar index, a measure of the greenback’s performance against a basket of currencies, rose 0.3 percent to 81.859.

Spain’s financial problems were also undermining confidence in the financial markets.

The country’s medium-term borrowing costs spiralled to a euro-era record at an auction on Thursday.

Spanish bond yields were down. Ten-year Spanish government bond yields were 23 basis points lower at 6.53 percent, having risen to almost 7.30 percent last week.

In the US, bond yields were down as well. Benchmark 10-year Treasuries were last up 11/32 in price to yield 1.62 percent, down from 1.65 percent late on Wednesday.