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Europe’s main stock markets slumped further yesterday, hit by concern over the emergence of a liquidity crisis in China and the withdrawal of US Federal Reserve stimulus, dealers said.
London’s FTSE 100 index of leading shares shed 1.42% to 6,029.10 points and Frankfurt’s Dax 30 fell 1.24% to 7,692.45 points, while in Paris, the Cac 40 dropped 1.71% to 3,595.63 points.
Madrid’s Ibex 35 index dove 1.91% and Milan’s FTSE Mib slumped 0.93%, as both indices were hit also by rising Italian and Spanish state borrowing costs on the bond market, traders said.
A sharp fall in bank shares pushed the Portuguese market down 2.95%.
The European single currency slid to $1.3100 from $1.3122 late in New York on Friday.
“Market shudder, caused by the withdrawal of QE in sight as hinted by Fed last week, has not really disappeared,” said Gekko Markets analyst Anita Paluch.
“The sentiment is very fragile — which shows how addicted the markets are from the easy money.”
Against such a backdrop, the yield on long-term US Treasuries soared to 2.61%, their highest level since August 2011 — in turn pushing eurozone bond yields sharply higher as well, dealers said.
German 10-year bond yields crept up to 1.78%, while the equivalent French bonds clocked in at 2.39% and British bonds 2.53%.
“It looks like we may be in for another volatile week as investors come to terms with a global economy with tapering central bank support,” said Mike McCudden, head of derivatives at online broker Interactive Investor.
Global equities had already slumped last week after the Fed signalled it may begin winding down its massive bond-buying policy, known as quantitative easing (QE).
London and Paris are now down more than 11% since peaks set last month, while Frankfurt is close to the 10% short term drop widely considered to be the definition of a market correction.
US stocks followed global markets lower, with the Dow Jones Industrial Average tumbling 1.5% in midday trading.
The broad-based S&P 500 sank 1.76%, while the tech-rich Nasdaq Composite Index dropped 1.66%.
Back in Europe, mobile phone giant Vodafone launched a €7.7bn ($10.1bn) cash offer for Kabel Deutschland, Germany’s biggest cable operator, yesterday.
Vodafone’s share price soared following the news but closed nearly flat at 175.9 pence.
And in the mining sector, the founders of Eurasian Natural Resources Corp and the Kazakh government launched a takeover bid valuing London-listed ENRC at £3.04bn ($4.67bn, €3.57bn).
In reaction, the share price of ENRC — one of Central Asia’s largest miners — climbed 0.52% to 218 pence.