(Updates to U.S. afternoon trading)
By David Randall
NEW YORK, Oct 1 (Reuters) - Weak economic data in the United States and Europe weighed on global stock benchmarks on Tuesday, sending investors into safe-haven assets.
European stocks fizzled after euro zone manufacturing data showed the sharpest contraction in almost seven years. U.S. stocks and the dollar dropped sharply on data showing manufacturing contracted to a 10-year low in September, adding to fears of a slowdown in the world's largest economy as a result of the trade war with China .
"The PMIs across the globe have continued to deteriorate and obviously we are in line with that deterioration. It's all due to the trade war," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
On Wall Street, the Dow Jones Industrial Average fell 244.36 points, or 0.91%, to 26,672.47, the S&P 500 lost 23.68 points, or 0.80%, to 2,953.06 and the Nasdaq Composite dropped 48.13 points, or 0.6%, to 7,951.21. Each index had posted modest gains in earlier trading.
MSCI's gauge of stocks across the globe shed 0.58%.
A slowdown in U.S. economic growth at a time when Europe is seen as close to falling into a recession would remove one of the few bright spots among global markets.
"If we look at some of the data out of either Asia Pacific or the European zone, the U.S. economic data has certainly been the stand-out across the board," said Art Hogan, chief market strategist at National Securities in New York.
U.S. stocks initially gained after White House trade adviser Peter Navarro dismissed reports on Monday that President Donald Trump's administration was considering delisting Chinese companies from U.S. stock exchanges as "fake news."
China and the United States are to resume trade talks next week in Washington.
"Whether it was a 'fake news' or not, it is becoming harder to know exactly what the U.S. administration will be doing," said Takashi Hiroki, chief strategist at Monex Securities.
Concerns over the economy helped send investors into the perceived safety of bonds. Benchmark 10-year notes last rose 9/32 in price to yield 1.6421%, from 1.673% late on Monday.
British government bonds had sold off as Prime Minister Boris Johnson pitched new proposals for an amended Brexit agreement that would remove the contested insurance policy for the Irish border.
"We had reached extreme lows (for bond yields) in August, but now the central banks have delivered the easing markets were expecting, I think we needed this correction," said Pooja Kumra, a European rates strategist at TD Securities.
The World Trade Organization cut its forecast for growth in global trade this year by more than half on Tuesday and said further rounds of tariffs and retaliation, a slowing economy and a disorderly Brexit could squeeze it even more.
Oil prices slipped after the weak U.S. data was released, with U.S. crude down 0.7% to $58.84 a barrel and Brent down 1.1% to $53.47.
Reporting by David Randall; Editing by Dan Grebler and Nick Zieminski