Bad news in major economies drives world stocks low, pushing investors into safer currencies and government bonds.A grim outlook for the U.S. economy from the Federal Reserve and signs of a slowing China and Germany drove world stocks sharply lower on Thursday and pushed investors into safer currencies and government bonds.European stocks tumbled nearly 4 per cent, helping drag global equities to a fresh one-year low.The dollar rose to a seven-month high against major currencies as a broad sense of aversion to risk swept through financial markets.The Fed set the ball rolling on Wednesday when it launched \"Operation Twist\", a plan to lower borrowing costs by selling or not renewing short-term debt in favour of longer bonds.The move was expected, but the Fed\'s statement of the rationale behind it was stark: There were \"significant downside risks\" to the U.S. economy.\"It seems the market doesn\'t believe Operation Twist is enough to kick start the spluttering economy ... (and) a very downbeat outlook ... seems to have unsettled markets even further,\" said Ben Potter, market strategist at IG Markets.Concern was increased on Thursday when HSBC\'s China Flash PMI showed the factory sector shrank for the third consecutive month in September, pointing to a slowdown in the world\'s second-largest economy.Business activity in Germany also grew at its weakest pace in more than two years in September and new orders fell for a third month.World stocks as measured by MSCI were down nearly 2.5 per cent to a new year low, making for a more than 14 per cent year-to-date loss. The more volatile emerging markets stock index was down 4.7 per cent for a 22 percent 2011 loss.In Europe, where questions about the ability of the euro zone to manage some of its countries\' heavy debt remain, stock losses amounted to a 21 percent fall for the year-to-date.The FTSEurofirst 300 fell 3.9 per cent.Japan\'s Nikkei closed down 2.07 per cent.