Europe Stocks Slide After China Data, Fed Comments
European stock markets opened with sharp losses on Thursday, after disappointing data from China and comments from the U.S. Federal Reserve about tapering its stimulus program stoked worries about slower global growth and less liquidity.
The Stoxx Europe 600 index slumped 1.5% to 305.96, retreating after closing at the highest level since June 2008, reached on Wednesday.
Banks posted some of the biggest losses, with Royal Bank of Scotland Group PLC 4.2% lower in London, Commerzbank AG off 3.2% in Frankfurt and BNP Paribas SA 1.9% down in Paris.
Investors were spooked by data from China, showing the country’s manufacturing activity unexpectedly contracted in May. The preliminary or “flash” version of the HSBC Purchasing Managers’ Index fell to a seven-month low of 49.6, down from April’s final reading of 50.4. A result below 50 signals contraction.
Additionally, markets worried the U.S. Fed will soon fade out its $85-billion-a-month bond-purchase program, which has helped global stock markets reach multiyear highs in recent weeks. Minutes from the central bank’s latest policy-setting meeting showed late Wednesday that a “number” of Fed officials were willing to taper as soon as the next meeting in June.
The minutes came just a few hours after Chairman Ben Bernanke told Congress that the central bank could start to reduce asset purchases in “the next few meetings” if data continue to improve.
U.S. stocks closed lower on Wednesday.
Both the Chinese data and Fed comments also spooked Asian investors on Thursday, with Japan’s Nikkei Stock Average closing 7.3% lower.
In Europe, mining firms were hit hard by the prospects of slower growth in China, as the country is a major user of natural resources. Anglo American PLC shaved off 4%, Rio Tinto PLC gave up 3.8% and BHP Billiton PLC dropped 2.5%.
The U.K.’s FTSE 100 index lost 1.6% to 6,733.81.
Germany’s DAX 30 index lost 1.9% to 8,370.32, while France’s CAC 40 index erased 1.8% to 3,976.83.
Marketwatch
