European stocks fell sharply and the euro slipped yesterday on a warning of a mild eurozone recession, uncertainty over the Greek debt swap and concern about China’s economic outlook.
At close of trade, Frankfurt’s DAX 30 skidded 3.40 per cent to 6,633.11 points, the Paris CAC 40 tumbled 3.58 per cent to 3,362.56 points and London’s benchmark FTSE 100 index lost 1.86 per cent to 5,765.80 points.
Elsewhere, Madrid and Milan both fell by 3.39 per cent, Lisbon by 2.66 per cent, Amsterdam by 2.49 per cent, Brussels by 3.17 per cent and Zurich by 1.73 per cent.
The European single currency retreated to $1.3112 from $1.3218 late Monday in New York.
The dollar retreated to 80.71 Japanese yen from 81.53 yen on Monday.
US stocks also fell as investors worried about Greece’s ability to meet a Thursday deadline for sealing a debt write-down pact with the private sector that is key to a bailout by the European Union and International Monetary Fund.
In midday trade, the Dow Jones Industrial Average dropped by 1.31 per cent, the broad-based S&P 500 slid 1.49 per cent, and the tech-rich Nasdaq Composite lost 1.42 per cent.
“A sea of red across global markets today (yesterday) as investors took money off the table,” commented Rebecca O’Keeffe, head of investment at online brokerage Interactive Investor.
“One of the main fear factors today was continued European concerns,” she noted.
“Confirmation that Europe’s economy contracted by 0.3 per cent in the fourth quarter and investors wary on the Greek debt swap did nothing to help the markets,” Ms O’Keeffe added.
A new full-year eurozone growth estimate of 1.4 per cent for 2011 was also issued by the EU statistics office Eurostat, which had previously estimated 1.5 per cent growth, following an expansion of 1.9 per cent in 2010.
The overall picture pointed to a double-dip recession within three years in the eurozone, which has been undermined by uncertainty arising from a debt crisis that is currently easing.
Eurostat confirmed an earlier estimate that output shrank by 0.3 per cent in the fourth quarter and revised down growth for the third quarter from 0.2 per cent to 0.1 per cent.
European stocks had begun the day on a weak note owing to uncertainty about the outcome of a Greek bond swap and debt write-down, a key condition for a rescue of €130 billion to save Greece from a debt default.
Traders also said that Monday’s announcement by Premier Wen Jiabao that China would target 7.5 per cent growth in 2012 cast a pall over global markets.
It represented a further slowing in the world’s number two economy – following a 9.2 per cent growth last year and 10.4 per cent in 2010 – as exports are hit by weak demand from the United States and Europe.
In Asia on Tuesday, Hong Kong slumped 2.16 per cent and Shanghai shed 1.41 per cent. Tokyo lost 0.63 per cent and Seoul slipped 0.78 per cent, while Sydney fell 1.37 per cent after the Australian central bank held interest rates steady at 4.25 per cent.