European equity markets reversed yesterday’s gains and retreated sharply in today’s trading session as disappointing economic data weighed on market sentiment and limited risk appetite. The CAC, DAX, IBEX and London benchmark index retreated sharply between 1.04% and 12.02%, tracking heavy losses in the US equity markets. At the time of writing, the Dow Jones has been retreating near 130 points (-0.8%) heading towards 16,800.
The IMF cut its global economic growth forecast for the third time this year, due to weaker than expected growth in major European economies as well as Japan and Brazil. The IMF cut its growth expectations to 3.3% for 2014 from 3.4% and 3.8% for 2015 from a 4.0% rise, causing nervous trading conditions across equity and commodity markets.
The euro came under extended pressure today, hitting a low at 1.2584, as poor economic data from Germany and France weighed heavily on market sentiment.
Germany’s industrial production fell sharply by 4% in August missing analysts’ expectations of a small 1.5% drop. In the UK, industrial production was flat at 0.0% in August compared to a rise of 0.5% in July. Sterling fluctuated strongly within the recent range of 1.6025-1.6125, struggling for clear direction following the recent mixed UK economic data.
Heavy losses in industrial and healthcare stocks dragged the London equity market lower today. Mining stocks reported fresh losses following weaker base metal prices. Airline companies also posted heavy losses following the recent Ebola outbreak. IAG (which includes British Airways and Iberia) and Easyjet plunged 6.9% and 5.3%, respectively.