* Euro zone PMI deals blow to economic recovery hopes * Italian elections cast doubt on reform program * US economic data suggest Fed easing still needed * Euro hits 6-week low vs dollar, 3-week low vs yen * Brent crude hits three-week low By Angela Moon NEW YORK, Feb 21 Major stock markets fell for a second day and the euro slid to a six-week low against the U.S. dollar on Thursday after data that showed weak economic growth in both Europe and the United States. Oil prices also slumped, with Brent crude falling to a three-week low, after a survey of euro zone business conditions dealt a blow to hopes the region might soon emerge from recession. In the United States, a raft of economic data from claims for jobless aid to factory activity and consumer price inflation also pointed to a slow economic growth and supported the argument for the Federal Reserve to maintain its monetary stimulus. The Fed is currently buying $85 billion in bonds per month and has said it would keep up the purchases until the labor market outlook improves substantially, although officials are increasingly divided over the wisdom of that course. "The economy is in a holding pattern. It's not going to strengthen sufficiently to justify an end of the current program," said Millan Mulraine, senior economist at TD Securities in New York. On Wednesday, minutes from the U.S. Federal Reserve's most recent meeting had suggested the central bank may slow or stop buying bonds sooner than expected, resutling in U.S. stocks suffering their biggest one-day decline since Nov. 14. By midsession in New York on Thursday, the MSCI world equity index was down 1.4 percent, its biggest daily loss so far this year. The Dow Jones industrial average was down 72.07 points, or 0.52 percent, at 13,855.47. The Standard & Poor's 500 Index was down 10.82 points, or 0.72 percent, at 1,501.13. The Nasdaq Composite Index was down 36.56 points, or 1.16 percent, at 3,127.85. In Europe, shares closed sharply lower, after weak economic data and ahead of this weekend's Italian elections which may call into question the country's economic reform program. Europe's Eurofirst 300 index shed 1.5 percent to close at 1,151.61. The blue chip Euro STOXX 50 index index fell 2.3 percent to 2,580,20, a new low for 2013. Earlier Japan's Nikkei share average fell back from a 52-month high with investors' risk appetite dampened by declines in U.S. shares. EURO SLIDES AGAINST DOLLAR AND YEN The euro dropped to a six-week low against the U.S. dollar and a three-week trough against the yen on Thursday in the wake of the data showing a struggling euro zone economy and amid uncertainty ahead of Italy's election at the weekend. The euro dropped to $1.3166, its lowest since Jan. 10, and well below a 15-month peak of $1.3711 reached on Feb. 1. The euro last traded at $1.3209, down 0.5 percent. The euro zone purchasing managers' (PMI) data for February pointed to continued weakness in the region, keeping alive chances of an interest rate cut by the European Central Bank in coming months. "The PMI news is not good and shows the euro zone is under economic duress and you add to the current uncertainty ahead of the Italian elections and we have a euro that is struggling to get ahead," said Matthew Lifson, senior trader and analyst at Cambridge Mercantile Group in Princeton, New Jersey. Prospects of a fragmented parliament after Italy's national election could trigger a sell-off in the peripheral bond market and weigh on the euro. Prices on 30-year U.S. Treasury bonds rose more than one point on Thursday as renewed economic worries intensified selling in stocks and risky assets and purchases of safehaven bonds. The 30-year U.S. government bond last traded 31/32 higher at 99-17/32, yielding 3.149 percent, down 5.2 basis points from late on Wednesday. It was up as much as 1-1/32 in price with a yield of 3.146 percent. In other risky assets, Brent April crude was down $1.75 at $113.85 a barrel, after slipping to $113.32 during the session, Brent's lowest price since Jan. 29. U.S. April crude was down $2.22 at $93 a barrel, after falling to $92.63, the lowest front-month price since Jan. 7, having dropped below the 50-day moving average of $93.32. The day's decline for both Brent and U.S. crude came after Brent's largest one-day fall in 2013 on Wednesday, as metals and equities also retreated after recent rallies.
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