Asia, Europe stocks sell off

NEW YORK (CNNMoney) -- Asian markets fell sharply and stocks in Europe were also under pressure Thursday, following China's surprise trade deficit and another downgrade of Spain's credit rating.

In the United States, stock futures were lower as investors remain nervous about the uncertain outlook for oil prices and the ongoing political crisis in Libya.

"Investors are very risk averse," David Jones, chief market strategist at IG Markets in London, adding that trading has been "directionless" recently.

European markets fell on renewed worries that the debt problems facing Spain, Greece and other fiscally troubled members of the European Union.

Moody's cut Spain's government bond rating to Aa2 with a negative outlook from Aa1, and said further downgrades are possible.

The Spanish government has underestimated the cost of restructuring the nation's banking system, Moody's said, suggesting it could have to borrow more. In addition, the ratings agency cast doubt on the government's ability to deal with long-term fiscal problems, as economic growth in Europe is expected to remain sluggish.

The move came after Moody's slashed Greece's credit rating three notches on Tuesday, citing the country's "very large debt burden" and challenges to its fiscal reform plan.

"It's not as if anything has changed in the last week with the Greek and Spanish economies," said Jones. "But on top of the market being generally nervous because of Libya, investors are very risk averse."

Meanwhile, stocks in Asia fell more than 1% after China reported a surprise $7.3 billion trade deficit, as imports outpaced exports in February for the first time in nearly a year.

The move surprised economists, who had expected China to report a trade surplus in February, albeit a smaller one. The monthly deficit was the country's first since March 2010.

However, government officials and analysts attributed the cooling exports to Chinese New Year, when the country's manufacturing output slowed dramatically.

"We are not overly concerned by the February data, as we believe the underlying export trend remains healthy," analysts at Nomura Securities wrote in a research report.

The deficit was largely due to "seasonal factors," the report said, adding that foreign demand for Chinese goods "seems to be on a stronger footing."

"With seasonal factors gradually abating, we expect export growth to return to more normal levels in the coming months," according to Nomura.

In morning European trading, Britain's FTSE 100 edged lower 1%, the DAX in Germany fell 0.7% and France's CAC 40 declined 0.6%.

Asian markets ended the session sharply lower. The Shanghai Composite fell 1.5%, the Hang Seng in Hong Kong slid 0.8% and Japan's Nikkei tumbled 1.4%.