By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- Europe's top stock index slumped to its
lowest close of 2013 on Wednesday, after Bundesbank President Jens
Weidmann warned the euro-zone's economic recovery could take a
decade, adding to investors' worries about global growth.
The Stoxx Europe 600 index fell 1.5% to settle at 283.73.
The decline marked the fourth straight day of losses, as worries
over a slowdown in global growth resurfaced after disappointing
data from China and the U.S earlier in the week.
"The rot may have been stemmed in the short term by positive
[quantitative-easing] comments from some senior Fed officials, but
there is a real sense that investors are starting to grow weary as
underlying economic data continues to disappoint," said Mike
McCudden, head of derivatives at Interactive Investor, in a
note.
"Without much by way of fresh data to direct investors today
markets may drift as they look with caution towards another Spanish
bond auction tomorrow and weekly jobs data from the U.S.," he
said.
Worries over growth in Europe sent bourses deeper into red
territory in the afternoon, after Bundesbank President Jens
Weidmann, in an interview with The Wall Street Journal, warned the
region could take as much as a decade to recover from debt crisis.
He also signaled the European Central Bank could cut interest rates
if needed.
The remarks come in the wake of weakening European economic data
that has called into question prospects for a return to growth in
the euro zone later this year. Read: Europe faces threat of
full-fledged depression
U.S. stocks traded lower on Wall Street.
German selloff
German stocks were among hardest hit in Europe, as vague rumors
that the country could face a sovereign downgrade added to fears in
an already sensitive market.
The DAX 30 index lost 2.3% to 7,503.03, the lowest closing level
since early December.
Shares of BASF SE shaved off 3.8%, after Nomura cut the
chemicals firm to neutral from buy.
"It took only some speculation of a German downgrade to send the
DAX plunging sharply lower, before it partially recovered. The
sensitivity of different markets to negative surprises seems to
have risen sharply recently, particularly in Europe and the broad
EM spectrum. It suggests that the period of consolidation is
continuing," said Sebastien Galy, senior currency strategist at
Société Générale, in a note.
Gregor Kuhn, markets strategist at IG Markets in Frankfurt, said
that the selloff in the DAX likely was caused by a big
institutional investor selling large holdings, in an effort to get
liquidity after the recent tumble in gold prices.
However, he didn't expect to see a larger decline in the near
term.
"It is consolidating on quite a high level and it isn't
something that is a surprise. It was time for a correction after
the impressive rally we've seen since last summer," he said.
"I don't think it'll go much deeper, because we'll see some
technical support zones. Between 7,200 and 7,440 there is quite
stable support, but if we break through that, the next support
level is at 7,000," he added.
Earnings
The earnings calendar in Europe featured some U.K. heavyweights,
with supermarket retailer Tesco (TSCDY)reporting its first drop in
earnings in 19 years, as write-downs wiped out much of the profit.
Shares were down 3.9%.
Heavyweight mining firm BHP Billiton PLC (BHP) dropped 3.4%
after saying iron-ore production was 5% lower in third quarter
compared with the prior quarter.
On a more upbeat earnings note, shares of Burberry Group PLC
(BURBY) gained 1.8%. The luxury retailer reported a rise in
second-half comparable sales, helped by strong sales in outerwear
and men's clothing.
The FTSE 100 index dropped 1% to 6,244.21.
On the data front in the U.K., the Office for National
Statistics said unemployment in the first quarter rose to 7.9% in
the three-month period to February, up 0.2 percentage points from
September to November last year.
Additionally in the U.K., minutes from the Bank of England's
April meeting showed the nine-member policy-setting committee voted
unanimously to keep rates at a record low 0.5%, while three
members, including Gov. Mervyn King, voted for an increase in asset
purchases.
France's CAC 40 index gave up 2.4% to 3,599.23, with oil major
Total SA (TOT), down 2.6%, tracking a slide for oil prices.
Shares of European Aeronautic Defence & Space Co. jumped
4.9%, as the company said it bought back 1.56% of its own shares
held by the French state. Additionally, German car maker Daimler AG
said it sold its entire 7.5% stake in EADS. Daimler shares dropped
1.9%.
Outside the major indexes, shares of ASML Holding NV (ASMLD)
gained 2.5%, after the chip-equipment maker reported first-quarter
sales ahead of market expectations.
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