European shares slip as IMF cuts forecast for global growth

European stock markets dipped yesterday after the International Monetary Fund cut its forecasts for global economic growth with sentiment also dogged by Spanish bailout speculation, dealers said.

At close, London’s FTSE 100 index of top companies sank 0.54 per cent at 5,810.25 points, Frankfurt’s Dax 30 fell by 0.78 per cent to 7,234.53 points, while in Paris the CAC 40 gave up 0.70 per cent to 3,382.78 points.

Madrid’s Ibex 35 index meanwhile declined by 1.85 per cent to stand at 7,745.40 points.

Wall Street was also lower in midday deals, with the Dow Jones Industrial Average losing 0.71 per cent and the S&P 500 falling 0.80 per cent. The tech-heavy Nasdaq Composite nose-dived 1.54 per cent.

“Markets are searching for direction as investors exercise caution following a discouraging global growth forecast from the IMF,” Wells Fargo Advisors analysts said.

In foreign exchange activity, the euro fell to $1.2873 from $1.2968 late in New York on Monday.

“Global growth fears are again today rattling market sentiment, with weak macro data combined with a lack of progress on Spain’s situation both curbing enthusiasm for risk,” said Ishaq Siddiqi of ETX Capital.

Asian markets were mixed yesterday, with concerns over Europe’s debt crisis overshadowing strong gains in Shanghai and Hong Kong fuelled by stimulus hopes.

“With the IMF announcing its second cut to global growth forecasts since April there is certainly a sombre tone to trading this morning,” said Mike McCudden, head of derivatives at Interactive Investor.

He added: “Investors are bedding down for a long winter as they do not expect to see any signs of growth now until mid-2013. They are taking a risk-off approach in locking in some profits and looking for safe havens where they can be found.”

European equities began yesterday with slender gains on speculation over more Chinese stimulus measures, according to analysts.

The IMF cut its growth forecasts for the world economy on Tuesday, citing the impact of market turbulence and budget-cutting in developed countries, and warned that things could worsen if the eurozone crisis was not resolved.

The Fund slashed its 2012 global growth forecast to 3.3 per cent, from its July estimate of 3.5 per cent, with Asia still leading the pack of expanding regions while Europe contracts an expected 0.4 per cent this year.