European stocks sank yesterday, resuming last week’s sell-off as worries over escalating tension in Ukraine and weak updates by bellweathers including Nestlé spooked investors.
Renewed concerns over the pace of growth in China ahead of GDP figures due today also weighed on sentiment, with mining giants BHP Billiton and Rio Tinto losing two per cent and 3.1 per cent respectively.
According to a Reuters poll, China is forecast to have grown at its slowest rate in five years in the first quarter, growing by 7.3 per cent, although speculations of a lower growth rate yesterday prompted investors to dump European mining shares,traders said.
The FTSEurofirst 300 index of top European shares ended one per cent lower at 1,306.85 points, resuming last week’s slide during which the index lost about three per cent, before slightly bouncing back on Monday.
The eurozone’s blue-chip Euro STOXX 50 index dropped 1.3 per cent to 3,091.52 points, closing below a key support level, its 50-day moving average, sending a bearish technical signal.
“We’re cautious in the short term, we’re waiting to see how the geopolitical situation evolves. There are a lot of uncertainties about Ukraine, which could become a negative catalyst for stocks if things spin out of control,” Barclays France director Franklin Pichard said.
Russia declared Ukraine on the brink of civil war yesterday as Kiev said an ‘anti-terrorist operation’ against pro-Moscow separatists was under way, with troops and armoured personnel carriers seen near a flashpoint eastern town.
Germany’s DAX index, seen as the most vulnerable to the crisis in Ukraine and sanctions against Russia, sank 1.8 per cent, with Continental down 2.3 per cent and Daimler down 3.4 per cent.
“Things have not improved in Ukraine, and this is weighing on the markets,” said Francois Savary, chief investment officer at Swiss bank Reyl, adding that stocks now needed firm evidence of a recovery in earnings to rally again, after making little headway during the first quarter.
Yesterday, a number of blue-chips posted business updates that fell short of analyst expectations.