Economic jitters, debt crisis hit European shares

Economic jitters, debt crisis hit European shares

Frankfurt: Renewed fears of a slowdown in the global economy combined with the long-dragging euro zone debt crisis weighed on European stocks on Friday, as one of the most volatile and worst quarters since late 2008 came to an end.

At 1125 GMT the FTSEurofirst 300 was down 1.7% at 917.11 points, after hitting an intra-day low of 913.43.

Shares extended losses after euro zone inflation unexpectedly rose in September to 3% and dampened hopes that the European Central Bank may cut interest rates next week.

The FTSEurofirst 300 index remains on course to record its best week in 26 months, helped by a bounce in the beaten-down financials sector, despite the poor performance for the quarter.

But monthly economic data showing a further contraction in China’s manufacturing sector and a pick-up in input prices added to fears for global economic growth.

“The latest available data show that 83.7% of global leading indicators have dropped month on month. We have only seen such breadth of economic weakness once before since our data began - in the 2008/09 recession," said Fredrik Nerbrand, Global Head of asset allocation at HSBC.

“As the world becomes increasingly focused on the same risks, macro-economic variables are becoming more correlated. This correlation is likely to amplify the economic cycle through a more pronounced negative feedback loop. In turn, this should increase economic volatility and boost required rates of returns," he added.

Shares in automakers and luxury goods groups were among the biggest decliners.

“Although the (Chinese) figures do not point to China’s hard landing as growth still remains above 9%, they definitely affect companies with distribution markets in China, like luxury goods manufacturers or carmakers, which have been benefitting from Asia’s economic expansion in recent years," a trader said.

Swatch Group lost 6%, while Richemont and Burberry were down 6.6% and 5.5% respectively.

BMW lost 6.8% and Daimler shares were down 4%, underperforming a 4.2% lower STOXX Europe 600 Automobiles & Parts index .

The STOXX Europe 600 Banks index lost 3.4%, with Deutsche Bank shedding 7% as investors anticipate Germany’s flagship lender to cut its outlook.