LONDON (AP) — Stocks fell again on Tuesday after grim U.S. manufacturing data fueled fears that the world's largest economy may be sliding back into recession.

The impact of the downbeat report from the Institute for Supply Management has more than offset relief to the news that U.S. lawmakers have finally agreed to a package of measures to raise the U.S. debt ceiling.

The House of Representatives comprehensively passed a bill increasing the ceiling. The Senate is expected to back it too, just in time to prevent a damaging debt default, though possibly not to avert a credit rating downgrade.

The manufacturing survey from the ISM provided some evidence that the protracted debt discussions in Washington have hurt economic confidence. A raft of U.S. economic data this week, which culminates with Friday's closely-watched nonfarm payrolls figures for July, will be monitored in that context.

Figures last week already showed that the U.S. economic recovery has slowed down dramatically, with annualized growth of only 1.3 percent recorded in the second quarter. The worry in the markets now is that U.S. growth will slow even further in the second half, at a time when China and Europe appear to be stalling, too.

"The potential for a U.S. credit ratings downgrade has not disappeared from investors' minds but there has been a bigger move to focus on economic data this week," said Sean Power, an equity analyst at City Index.

In Europe, the FTSE 100 index of leading British shares was down 0.6 percent at 5,741 while Germany's DAX fell 0.5 percent to 6,917. The CAC-40 in France was 0.4 percent lower at 3,573.

Wall Street was poised for further losses at the bell, though monthly personal income and spending figures as well as auto sales numbers could have an impact on the actual open. Dow futures were down 0.3 percent at 12,008 while the broader Standard & Poor's 500 futures fell 0.4 percent to 1,275.

In the currency markets, the dollar has been making some gains since Monday's ISM figures. Even though the data stoked worries over the U.S. economy, the dollar often garners support through its status as a perceived safe haven in volatile trading.

The euro is also being hobbled by worries that Europe's debt crisis may spread, possibly to much bigger Spain, which has seen the yield on its ten-year bonds rise to their highest level since the euro was established in 1999. There are also mounting worries that the small island nation of Cyprus may be dragged into the debt crisis mire through its close connections with Greece and the damaging economic consequences of last month's blast at the country's main power plant.

By early afternoon London time, the euro was trading at $1.4195, around two cents lower than where it was before the ISM figures were released Monday.

Meanwhile, the dollar has edged higher from near all-time lows against the yen amid mounting speculation that Japan's monetary authorities may intervene in the markets to stem the export-sapping appreciation of the currency.

The dollar fell as low as 76.29 yen Monday, just shy of its record post-World War II low of 76.25 yen in the days following the March 11 earthquake and tsunami. The yen's strength in March prompted the world's leading central banks to join together to weaken the currency.

The prospect of further intervention, whether unilateral or not, has helped the dollar push back up to 77.32 yen.

The yen's strength is another cause for concern for Japan's major exporters and the Nikkei 225 closed down 1.2 percent to 9,844.59.

Elsewhere, China's Shanghai Composite Index lost 0.9 percent to 2,976.26 and Hong Kong's Hang Seng shed 1.1 percent to 22,421.46.

Worries over the global economy weighed on oil prices. Benchmark oil for August delivery was down 55 cents to $94.34 a barrel in electronic trading on the New York Mercantile Exchange.