Europe: Stocks selloff deepens as global growth worries intensify

SEP 2, 201512:01 AM

[LONDON] The plunge that led Europe's equities to their biggest monthly losses since 2011 is showing no signs of easing.

The Stoxx Europe 600 Index lost 2.8 per cent at 4:32 p.m. in London, and dropped as much as 3.3 per cent. The measure followed Asian stocks lower after a report showed China's official factory gauge dropped to a three-year low, while separate data signaled manufacturing in the euro area shrank more than initially forecast and output in the US expanded at the slowest pace since 2013. Miners again were the most hurt among European industry groups, sliding 5.7 per cent as commodities resumed their declines.

"There seems to be a bit of an industrial downturn going on in Asia," Dirk Thiels, head of investment management at KBC Asset Management, said by phone from Brussels. "People are still trying to assess what the impact of that will be on the rest of the world and it's not an easy one. You can't really call the bottom of the market at the moment. We are a bit worried."

The slide in commodity prices and rebound in the euro prompted Morgan Stanley to cut its forecasts for profit growth at European companies. The bank now projects earnings will be flat this year before rising 7 per cent next and 10 per cent in 2017.

FTSE 100 Slide Benchmark measures for UK, Spanish and Portuguese equities fell the most in western Europe on Tuesday, sliding more than 2.7 per cent. The DAX Index has lost 19 per cent from its record in April. Fourteen out of the 18 markets in the region have fallen more than 10 per cent from their highs.

The Stoxx 600 plunged 8.5 per cent in August amid growing concern that China's economy would falter, just as the Federal Reserve gets ready to increase interest rates. The equity measure ended little changed on Monday, while US stocks fell, amid low trading volume as the UK market was closed for a holiday.

The benchmark gauge for Europe's stocks ended Monday 12 per cent below the record it reached in April, sending its valuation to 15.6 times estimated profit, lower than US shares. A plunge in commodities sent miners and energy producers down the most in August, and stocks worldwide lost about US$5.7 trillion in value.

The market rout on Tuesday was again broad-based, with about 580 of the Stoxx 600's shares falling. Altice NV dropped 6.8 per cent after naming Michel Combes chief operating officer. Man Group Plc lost 7.2 per cent after a person familiar with the matter said Chinese authorities took the chairwoman of the hedge fund's Chinese unit into custody to assist with a probe into market volatility.

Elekta AB was among the few stocks that rose, jumping 7.9 per cent after the Swedish maker of medical devices forecast a return to growth in the second half of the year.