European stock markets retreated yesterday as investors reacted to a flood of global economic data that highlighted weak growth worries as well as rising bond yields, traders said.
London’s FTSE 100 index of leading shares lost 1.99% to 6,627.17 points, Frankfurt’s Dax 30 index fell 1.70% to 8,336.58 points, and in Paris the Cac 40 dropped 1.89% to 3,974.12 points.
The Milan and Madrid stock exchanges slid 1.61% and 0.82% respectively.
“In an almost complete reversal of yesterday’s price action the bears have reasserted themselves today, overturning the brief return to optimism as European equity markets slide back sharply on the back of rising bond yields,” said Michael Hewson, an analyst at CMC Markets UK.
He said rising concerns that the US Fed could soon begin reducing its monetary stimulus plan has sent US bond yields to 12-month highs, and hiked fears of a possible correction in the markets.
Sentiment was also hit by the IMF and the OECD lowering growth forecasts.
The International Monetary Fund cut its 2013 growth forecast for China to “around 7.75%” from 8.0%, citing a sluggish global recovery which hurt exports.
China is seen as a potential driver of global recovery in the face of the eurozone’s ongoing debt crisis and unsteady growth elsewhere.
In foreign exchange trading, the euro rose to $1.2890 from $1.2855 late in New York on Tuesday.
The dollar fell to ¥101.74 from ¥102.32 on Tuesday.
On the London Bullion Market, the price of gold climbed to $1,382.50 an ounce from $1,376.50 on Tuesday.
Figures out yesterday revealed that bank lending to the private sector in the eurozone contracted again in April as the region’s long-running debt crisis continues to choke demand for credit.
Bank deposits also dropped in a possible reaction to the Cyprus bailout.
Meanwhile the European Commission yesterday gave major economies France and Spain extra time to trim their deficits as it laid down economic targets for EU nations that desperately need growth and jobs in the fallout from the debt crisis.
The Netherlands, Poland, Portugal and Slovenia should also be given extra time to cut their deficits, the Commission said, while recommending that Malta be placed under scrutiny and sharply criticising Belgium for failing to do enough to trim its deficit.
US stocks slid on concerns linked to monetary policy and global growth.
In midday trading the Dow Jones Industrial Average was down 0.88%, the broad-based S&P 500 shed 0.77% and the tech-rich Nasdaq Composite gave up 0.76%.