Europe’s main stock markets fell sharply yesterday on news that US manufacturing declined for the third straight month and as investors weighed prospects of new bond-buying by the European Central Bank.
At close, London’s FTSE 100 index of top companies was 1.50 per cent lower at 5,585.61 points, Frankfurt’s DAX 30 lost 1.17 per cent to 6,932.58 points, and in Paris the CAC 40 fell by 1.58 per cent to 3,399.04 points.
Shares in debt crisis flashpoints, which had risen all day lifted by recent comments from ECB president Mario Draghi, pared gains by close with Madrid stocks up 0.73 per cent and Milan down 0.29 per cent.
Borrowing prices for Spain and Italy meanwhile fell sharply with investors increasingly expectant the ECB will decide to come to the aid of the eurozone’s most fragile members at a policy meeting on Thursday.
On the secondary markets the rate of return on Spain’s benchmark 10-year debt fell to 6.570 per cent from 6.853 per cent late on Monday, while Italian benchmark yields fell to 5.669 per cent from 5.771 per cent.
In foreign exchange deals, the euro fell to $1.2562, compared with $1.2593 late in New York on Monday.
US stocks, which had opened flat as investors returned from a three-day weekend, nosedived after the announcement of poor manufacturing data for August.
“The details of of the manufacturing survey are worrying,” said Alexandre Estiot of BNP Paribas.
The Institute for Supply Management said its PMI index of US manufacturing stood at 49.6 per cent in August, falling from 49.8 the prior month. A reading below the 50 line suggests the sector is contracting.
At around 1600 GMT, the Dow Jones Industrial Average was down 0.72 per cent, the broad-based S&P 500 was off 0.49 per cent and the tech-rich Nasdaq fell 0.63 per cent.
Europe’s main markets had risen across the board on Monday on hopes over the outcome of the ECB’s latest monetary policy meeting that concludes this Thursday.
In Brussels on Monday, Draghi defended controversial measures taken to tame the eurozone debt crisis, including buying up government bonds, European MPs said.
MEPs said Draghi told them that the central bank had a responsibility to intervene when necessary.
Draghi, who made no public comment, said that buying government bonds of up to three-year maturities on the secondary market did not amount to bailing out spendthrift euro members – a charge levelled by many German politicians.
ECB bond buying in the past was justified, he said according to MEPs who spoke after his briefing, to help stabilise and protect the 17-nation eurozone.
In Asia, markets fell yesterday in subdued trade.
Hong Kong ended 0.66 per cent lower, Tokyo slipped 0.10 per cent, Sydney fell 0.61 per cent, Seoul lost 0.29 per cent and Shanghai retreated 0.75 per cent.