European equity markets extended losses on Tuesday, tracking sharp declines on Wall Street as the Dow Jones has plunged more than 100 points, at the time of writing, weighing on market sentiment. CAC, DAX and IBEX retreated sharply between 1.45% and 2.46%, while London fell by 0.95% to reach a 6-week low, dragged down by commodity stocks.
Mining stocks weighed on market sentiment following weaker base metal prices as stronger than expected US economic data prompted investors to believe that the QE programme could soon be scaled back in the US. Antofagasta, Randgold, Polymetal, Fresnillo and Man Group declined between 1.45% and 4%.
Financial stocks were also lower due to risk aversion. Standard Life and Barclays fell by 2.7% and 1.5%.
On the macroeconomic front, the UK Markit construction PMI was fairly strong at 62.6 in November, compared to 59.0 in October. Eurozone’s Producer prices fell by 0.5% in October, slightly more than analysts expected. In the US, the ISM NY index was fairly strong at 608.5, while the IBD economic optimism was reported at 43.1 in December.
It seems that the encouraging US economic data is currently being viewed as bullish on QE tapering and therefore bearish for the equity and commodity markets.