Published: Mar 05, 2012 5:05 PM EST

LONDON (AP) - Worries over China's economic growth weighed on markets Monday, but an indication that Greece was making headway in convincing private creditors to accept a crucial bond swap helped European stocks clamber off lows.
    
Investors are increasingly fearful that China's economy is coming off the boil. Over the past few year, a booming Chinese economy has helped shore up the global economy in the wake of a banking crisis, the deepest recession since World War II and rising concerns over the debt problems afflicting a number of countries that use the euro.
    
On Monday, China's premier Wen Jiabao lowered the economy's growth target to 7.5 percent from the 8 percent it has stood at for years as he outlined plans to boost domestic consumption and to maintain a "prudent" monetary policy.
    
Analysts said the forecast downgrade was in line with recent pronouncements and did not necessarily mean that China would not be growing by more than 8 percent anyway.
    
"Actual growth rates typically exceed official targets by a considerable margin, and this does not alter our forecast for 8.4 percent growth in 2012," said Elsa Lignos, an analyst at RBC Capital Markets.
    
For much of the day, worries that Greece's bond swap may not be going according to plan had kept sentiment in check.
    
However, some relief was provided when the Institute of International Finance, the group representing private creditors in talks with Greece, said a dozen banks, insurers and investment funds holding Greece's bonds will participate in the swap.
    
The investors that have promised to participate in the plan include German insurer Allianz, French bank BNP Paribas, Germany's Commerzbank and Deutsche Bank, as well as Greece's Eurobank EFG and National Bank of Greece, the IIF said. The banking group did not say how much Greek debt these institutions hold.
    
Greece's bondholders are offered new bonds that worth 53.5 percent in face value, and which have a longer maturity and lower interest rate. The bond swap deal is one condition of Greece getting a second, €130 billion ($173 billion) bailout from other eurozone countries and the International Monetary Fund.
    
Greece and its partners in the eurozone are eager to bring the deal off as a voluntary exchange - meaning it does not trigger payouts on credit default swaps. Analysts estimate the net amount that would be paid out at about $3.2 billion, though uncertainty over who would sustain the losses could create uncertainty throughout financial markets.
    
Athens has passed into law - but not yet used - so-called collective action clauses that would force holdouts to take the deal, but most of Greece's bondholders have to agree to the deal in the first place.
    
The statement from the IIF was enough to prompt a modest improvement in market sentiment as did more upbeat U.S. economic data - the Institute for Supply Management said its index of non-manufacturing activity rose to 57.3, from January's 56.8. The markets had been expecting a modest decline. Any reading above 50 indicates expansion.
    
In Europe, Germany's DAX was down 0.4 percent at 6,891 while the CAC-40 in France fell 0.2 percent to 3,493. The FTSE 100 index of leading British shares was also down 0.3 percent at 5,896. The euro was unchanged at $1.32.
    
On Wall Street, the Dow Jones industrial average was down 0.6 percent at 12,897 while the broader Standard & Poor's 500 index fell the same rate to 1,361.
    
The focus over the rest of the week will likely center on Greece, though a raft of U.S. economic data that culminates with Friday's nonfarm payrolls figures will clearly have an impact.
    
Russian shares were among the only to rise in Europe on Monday, with the Micex edging up 0.3 percent, as investors took the election of Vladimir Putin as president as a sign of continuing stability. In the longer term, however, analysts say Putin will have to deliver on promises to modernize the economy, reduce corruption and address the grievances of a growing base of political opposition.
    
Earlier in Asia, Japan's Nikkei 225 index fell 0.8 percent to 9,698.59 and South Korea's Kospi dropped 0.9 percent to 2,016.06. Hong Kong's Hang Seng lost 1.4 percent to 21,265.31. Mainland Chinese shares were mixed, with the Shanghai Composite Index closed down 0.6 percent to 2,445 and the smaller Shenzhen Composite Index marginally higher at 981.20.
    
Oil prices recovered alongside equities - benchmark oil was up 3 cents to $106.73 per barrel in electronic trading on the New York Mercantile Exchange. Oil prices remain elevated though, partly because of tensions over Iran's nuclear ambitions, and have become an increasing drag on stocks over the past couple of weeks.
    
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Pamela Sampson in Bangkok contributed to this report.

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