European stocks close sharply lower

European stock markets closed sharply lower yesterday after Japan warned that last month’s devastating earthquake would have a much greater impact on the economy than first thought.

Dealers said the warning was made worse after Tokyo upgraded the seriousness of the crisis at its damaged Fukushima nuclear plant, making for a bad day in Asian trade which hit sentiment in Europe in turn.

They said disappointing results from US aluminium giant Alcoa got the corporate quarterly results season off to a bad start and hit investors who had been betting that the US economy was picking up momentum.

An IMF downgrade of its US growth forecast alongside a weakening in an investor confidence survey in Germany added to the negative tone.

In London, the FTSE 100 index of leading shares closed down 1.47 per cent at 5,964.47 points. In Paris, the CAC 40 fell 1.54 per cent to 3,976.60 points and in Frankfurt the DAX lost 1.42 per cent to 7,102.91 points.

Other European markets posted similar substantial losses. “Downgraded growth forecasts by the IMF for the US economy and news from Japan that the nuclear crisis continues to worsen has hit risk appetite hard across the globe,” said IG Index trader Ben Critchley.

“All told, equity traders are starting to look rather more (negative) and with a run of (Easter) holidays coming up, the risk now has to be that volumes start to dry up and the downward trend continues.”

In Paris, Arnaud de Champvallier of Turgot Asset Management said it looked as though investors chose to take some profits after recent gains.

“These news leads were the basis for a consolidation on the market ... which seemed reasonable,” Mr de Champvallier said.

“The market fell in modest volumes,” he said, adding that meant the losses were part of a consolidation, “at least for the moment.” In New York, stocks followed Asian and European markets lower, finding no lead in Alcoa’s results where lower-than-expected sales sent its shares down more than five percent in early trade.

The blue-chip Dow Jones Industrial Average was off 0.98 per cent at around 1640 GMT while the tech-heavy Nasdaq Composite lost 1.02 per cent.

“In Asia, news that the Fukushima nuclear crisis was levated on par with Chernobyl rocked equities,” said Kimberly DuBord of Briefing.com.

In Asian trade earlier yesterday, markets were hit after Japan said the impact on the economy of last month’s devastating earthquake was worse than first thought, with the warning made worse again as it upgraded the danger rating on the crisis at its Fukushima nuclear plant.

Tokyo lost 1.69 per cent while Hong Kong fell 1.34 per cent but Shanghai was flat. Sydney shed 1.46 per cent.