European stock markets fell sharply on Tuesday as solid US data sparked renewed talk that the Federal Reserve could soon start tapering its vast economic stimulus, dealers said.
“Another negative day on Europe?s markets today as once again stock markets feel the pressure of profit taking from investors who appear keen to lock in some of the gains of the last few months ahead of this week?s key data announcements from the other side of the Atlantic (Stuttgart: A0J3C9 – news) ,” said Michael Hewson, Chief Market Analyst at CMC Markets.
“The recent direction of travel of US data continues to point to an increased probability that we might see a token indication from the Fed that a paring back of asset purchases may come sooner rather than later,” he said.
At close, London’s benchmark FTSE 100 index was down 0.95 percent at 6,532.43 points.
Frankfurt’s DAX 30 dropped 1.90 percent to 9,223.40 points and the CAC 40 in Paris fell 2.65 percent to 4,172.44 points.
Europe’s major markets had mostly fallen on Monday, making a downbeat start to the week on news of shrinking manufacturing activity in France and Spain.
In Paris, the telecom sector was in focus after Free, a unit of Iliad (Paris: FR0004035913 – news) , said that it would include fourth generation (4G) mobile service in its low-cost service package.
Free has put the French mobile telecom market in turmoil with a cut-price package, and competitors had hoped to re-build margins by charging extra for 4G service that allows super fast movie and music downloads.
Shares in Illiad rose 0.81 percent to 174.65 euros on the Paris market. Rival Orange fell by 3.43 percent to 9.20 euros and Vivendi (Berlin: VVU.BE – news) , which owns SFR, fell by 3.19 percent to 18.16 euros.
But other companies were hit even harder by profit-taking. Shares in Airbus (Paris: NL0000235190 – news) -maker EADS (Dusseldorf: EAD.DU – news) lost 3.71 percent, energy giant EDF (Paris: FR0010242511 – news) lost 3.54 percent and carmaker Renault (TLO: RENA-U.TI – news) sank 4.58 percent.
In Germany car shares also slumped after sluggish sale data for November. BMW (Frankfurt: BMW.F – news) lost 1.87 percent to 83.52 euros and Volkswagen (Other OTC: VLKAF – news) sank 2.24 percent to 192.30 euros.
US stocks followed European markets with the Dow Jones Industrial Average down 0.71 percent at 15,895.20 in midday trading.
The broad-based S&P 500 fell 0.56 percent to 1,790.87, while the tech-rich Nasdaq Composite Index gave up 0.29 percent at 4,033.41 points.
Asian equity markets also mainly fell on Tuesday.
Hong Kong stocks dipped 0.53 percent, while Shanghai added 0.69 percent and Tokyo rose 0.60 percent.
In the United States, the Institute for Supply Management said Monday that factory activity grew at a much faster rate in November than in October.
The news raised the prospect the Fed will start to cut back its $85 billion a month bond-buying programme this month as the economy shows signs of improving, dealers said.
In foreign exchange activity on Tuesday, the euro rallied to $1.3604 from $1.3539 late in New York on Monday.
The dollar meanwhile hit 103.38 yen — the highest level since May. It later stood at 102.37 yen, down from 102.94.
The euro edged up to 82.87 pence against the British pound, which was firmer at $1.6415.
On the London Bullion Market, gold prices hit $1,215.39 per ounce — the lowest level since early July.
European shares slump on Fed tapering fears
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