Manufacturing around the globe expanded in July at the weakest rate since the 2009 recession, adding to concerns over world growth.   

After an initial bounce on signs a last-minute solution would avoid a US debt default, stocks fell as manufacturing purchasing managers indexes provided the latest evidence of a slowing global economy.

The US Institute for Supply Management manufacturing report, a gauge of factory activity in the world's largest economy, fell to 50.9 in July, its lowest since July 2009, and barely above the 50 mark dividing growth and contraction.   

A contraction in new orders was particularly worrisome and pointed to an economy that is starting the second half of the year on weak footing just as investors were getting more optimistic that a first-half slowdown would be short-lived. 

"This is quite a disappointing number to digest," said Millan Mulraine, senior US macro strategist at TD Securities in New York. "It shows that the economy is off to an equally weak start for the second half of the year. It's only one point, but it's one very important point nonetheless."   

The ISM report came after a surprisingly weak reading for US growth in the first half of the year, which showed the economy grew at just a 1.3 percent pace in the second quarter and produced near flat growth in the first quarter.

In Europe, the euro zone manufacturing PMI, which gauges thousands of businesses, fell to 50.4 in July from 52.0 in June -- its worst showing since September 2009.   

Perhaps more worrying, China's official government PMI dropped to 50.7 from 50.9 in June, its weakest in more than two years, while the HSBC PMI fell below the 50 mark for the first time in a year -- to 49.3 in July from 51.6.

China was the main engine of growth as the developed world sank into recession after the 2008 financial crisis, and signs of a slowdown there would worsen the global outlook at a time when both the US and European economies are struggling with debt crises.

In Germany, the euro zone's key growth engine in the recovery thus far, manufacturing growth fell to a 21-month low after new orders contracted for the first time in more than two years.

"At the global level, the manufacturing cycle is taking a turn for the worse," said Silvio Peruzzo, economist at RBS in London.

"It's not a euro area story, it's a broad-based story. Look at China, look at other advanced economies -- clearly the manufacturing cycle has taken a turn which was more pronounced than was probably anticipated."    

Peruzzo said for the euro zone at least, it might take a few more months to draw conclusions about whether the slowdown is of a transitory nature, or whether another recession is on the way.  - Reuters