* Weak euro zone manufacturing, services data sparks demand
fears
* China's manufacturing sector contraction adds to worries
* Initial selling triggers stop loss sell orders, adding
shorts

NEW YORK, Feb 22 (Reuters) - U.S. cotton prices
finished sharply lower on Wednesday, driven down by demand
worries evoked by weak economic data in Europe and China that
cast a shadow on global growth prospects.
Once the selling got underway, stop-loss sell orders were
triggered, compelling speculative players to add to their short
positions and exit long positions.
"Part of this sell-off is from the outside markets, and then
we started hitting a lot of sell stops, and specs were adding to
shorts and getting out of longs," said Sharon Johnson, senior
cotton analyst at Penson Futures in Atlanta.
New benchmark May futures on ICE Futures U.S. ended
at 90.53 per lb, a 2.44 cent and 2.62 percent drop. It moved to
its lowest level since Dec. 29 at 90.45 from 93.45.
May volume jumped 18,276 lots shortly after the exchange
session finished.
March cotton also plummeted, settling at 88.57 cents,
down 2.68 cents, or 2.94 percent, per lb. It was the lowest
close since Dec. 27. The range ran from 88.50 to 91.65 per lb.
Volume was 5,356 in late business, a light tally ahead of
the delivery period which begins on Thursday.
Data showing tepid European business activity worried
investors in many markets, including cotton, about heightened
prospects of slow growth or recession in the euro zone.
Euro zone data showing shrinking services and manufacturing
sector activity tempered optimism after a deal was reached in
the previous session to bail out Greece.
It also followed a contraction in China's manufacturing
sector in February for the fourth straight month, as new export
orders dropped sharply.
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Euro zone PMI & GDP growth: link.reuters.com/rud84s
France PMI & GDP growth: link.reuters.com/vuv26s
German PMI, IFO & GDP growth: link.reuters.com/puq93S
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Following a sharp sell-off two weeks ago, cotton had found
buyers in the export market at levels below 92 cents.
In the current session, however, Jobe Moss of MCM Inc in
Lubbock, Texas noted that prices, "Went through there like a hot
knife through butter."
He added that worries about demand for the fiber have been
prevalent ever since the U.S. Department of Agriculture issued
its last supply and demand report, in which it lowered its
estimates for this year's world demand outlook.
"I really think the world supply/demand that came out on the
last crop report finally hit the perma-bulls in the face. We've
now had six months of declining demand," he said.
Open interest in cotton, an indicator of investor exposure,
declined by 6,229 lots to 172,437 lots as of Feb. 21 ICE Futures
U.S. data showed. On Tuesday, volume fell by 564 lots to 23,599
lots from Friday's count, exchange data showed.