LONDON — Disappointing U.S. economic data hit stocks hard on Wednesday and pushed the dollar to an 18-month low against the euro.

After a weaker-than-expected survey from the ADP private payrolls firm, investors were shocked by a report into the services sector from the Institute for Supply Management.

Its main index unexpectedly tumbled to 52.8 in April from the previous month's 57.3. That means the sector is still growing but at a sharply slower pace than before — anything above 50 indicates growth.

Though one month's figures must be interpreted with a degree of caution, the ISM survey has stoked concerns in the markets that the U.S. economic recovery is slowing down.

"We don't want to wave the panic flag just yet due to the fact that what we saw this month could simply be payback from unsustainably strong data in the first quarter," said Joshua Shapiro, chief U.S. economist at MFR Inc.

Nevertheless, there is a concern in the markets now that Friday's official government payrolls figures for April may disappoint — the figures often set the stock market tone for a week or two after their release.

"There is now downside risk to our call for 180,000 net new jobs for April," said Jennifer Lee, senior economist at BMO Capital Markets.

That risk was dominating trading activity.

In Europe, the FTSE 100 index of leading British shares was down 1.5 percent at 5,990 while Germany's DAX fell 1.5 percent to 7,387. The CAC-40 in France was 1.1 percent lower at 4,054.

In the U.S., the Dow Jones industrial average was down 0.7 percent at 12,712 soon after the ISM survey, while the broader Standard & Poor's 500 index fell 0.7 percent to 1,347.

The dollar was hit hard, too, with the euro trading 0.6 percent higher on the day at $1.4915, just shy of its earlier 18-month high of $1.4942.

The euro is gathering support in the run-up to Thursday's monthly interest rate decision from the European Central Bank. The expectation in the markets is that the ECB will indicate that it will follow April's first interest rate increase in nearly three years with another rise in June.

That belief has bolstered the euro currency over the past couple of months despite ongoing debt problems, most notably in Greece, Ireland and Portugal. While the ECB is poised to raise interest rates again in the coming months, the U.S. Federal Reserve has shown few signs it's ready to lift its super-low interest rates. That's added to the dollar's recent weakness against the euro.

The euro's gains Wednesday came despite figures showing a 1 percent decline in eurozone retail sales in March, and confirmation that Portugal has agreed to a €78 billion ($115 billion) bailout from its partners in the EU and the International Monetary Fund.

"For the foreign exchange markets, the details of Portugal's bailout terms are of little relevance with the focus still firmly on diverging policy between the U.S. and elsewhere," said Derek Halpenny, European head of global currency research at The Bank of Tokyo-Mitsubishi UFJ.

Earlier, fears of more interest rate increases in China weighed on stocks in Asia. Following another interest rate increase by India's central bank, the People's Bank of China voiced its continued concerns over inflation, stoking speculation that it may raise interest rates again in the months to come.

As a result, Chinese shares were the big losers Wednesday with mainland Chinese shares posting their biggest loss in over two months. The Shanghai Composite Index fell 2.3 percent to 2,866.02, while the Shenzhen Composite Index lost 2.2 percent to 1

Elsewhere in Asia, Hong Kong's Hang Seng index dropped 1.4 percent to 23,315.24, while South Korea's Kospi fell 0.9 percent to 2,180.64. Markets in Japan were closed for a holiday.

In the oil markets, benchmark crude for June delivery was down 48 cents at $110.55 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.47 to settle at $111.05 on Tuesday.


Pamela Sampson in Bangkok contributed to this report.