European shares hit a one-month closing low on Tuesday after fresh growth and Greek debt-deal concerns drove a long-awaited correction, ending an almost three-month rally. Investors cashed in profits after new concerns surfaced that Greece would not secure private creditors' support for its debt restructuring, while worries about slowing economic growth in China, Europe and Brazil weighed on sentiment.
The FTSEurofirst 300 index of top European shares closed down 2.6 percent at 1,052.11, its lowest since February 1. "The market appears to have gotten a bit ahead of itself in recent weeks," said Markus Huber, head of German trading at ETX Capital, adding that as long as uncertainty around Greece remained, markets continue to be vulnerable.
Concerns about the strength of the global economy came a day after China cut its growth forecast, while data indicated that Europe is likely to fall back into recession. "Despite the fact that China downgraded its growth forecast yesterday ... markets have today decided, somewhat belatedly, that this is a bad thing, and have turned sharply lower," said Michael Hewson, analyst at CMC Markets.
Brazil, another emerging economy, saw its 2011 growth slip to 2.7 percent from 7.5 percent in 2010. While Germany's DAX and the French CAC40 lost 3.4 percent and 3.6 percent respectively, the UK's FTSE 100 ended down around 1.9 percent. Trading volume was between 104-134 percent of 90-day averages. The STOXX Europe 600 Banks index lost 4.2 percent. The index had gained about 28 percent since mid-December when the European Central Bank launched its first cheap funding exercise.
This long-term refinancing operation (LTRO) eased fears of an outright credit crunch. Societe Generale, Credit Agricole and Erste Bank were the biggest decliners in the index, with losses of between 7.1 percent and 7.8 percent. The STOXX Europe 600 Automobiles & Parts index took a 4.9-percent beating, ending a 40 percent rally. Fiat lost 6.1 percent, Germany's Daimler dropped 5.3 percent and BMW ended down 5.1 percent.
Comments
Comments are closed for this article.