Fresh doubts over consumer spending slammed European shares to three-month lows yesterday, with investors ditching economy-sensitive media and retail stocks for more defensive investment plays such as drugmakers.
Disappointing updates from German industrial giant Siemens, French-Italian chipmaker STMicroelectronics, British home-improvement chain Kingfisher and Norwegian telecoms operator Telenor also eroded investor confidence that earnings prospects justified current stock-market valuations.
A $1 drop in oil prices did little to bolster sentiment, pounding instead heavily weighted oil stocks such as BP and Total, which shed over two per cent each.
The FTSEurofirst 300 index of European blue chips ended 1.3 per cent lower at 1,059.7 points, its lowest closing level since January 28. The DJ Euro Stoxx 50 index fell 1.4 per cent to 2,942.6 points.
An unexpected 2.8 per cent drop in March US durable goods data fed worries about slower growth in the world's biggest economy, while data showing that French business morale had slumped to an 18-month low dealt a fresh blow to Europe's economic outlook.
"It is a conjunction of negative signs," said Christine Franquin, portfolio manager for Vanguard Investments Europe in Brussels. "We had a series of bad earnings data. At the same time we've had quite a few bad numbers on consumer confidence."
Investors now turn their eyes to today's US gross domestic product report, with economists expecting the US economy to have expanded by 3.6 per cent in the last quarter.
Such a result would be off from 3.8 per cent in the previous quarter, but still above the assumed long-run growth potential of the economy.
Around Europe, London's FTSE 100 eased by 1.2 per cent, Paris's CAC-40 lost 1.1 per cent and Frankfurt's DAX fell 1.6 per cent. In Zurich, the SMI was down 1.2 per cent.
Morgan Stanley analysts drew a parallel with last year, when shares started brightly but also faltered in the spring before rallying in the second half. But they said the risks are greater this year because interest rates and oil prices are higher and leading economic indicators are lower.