European Equities Sink on Slowing US Growth

European Equities Sink on Slowing US Growth

European stocks tumbled Wednesday on weak US economic growth data, and before the outcome of the Federal Reserve's latest monetary policy meeting.

European stocks tumbled Wednesday on weak U.S. economic growth data, and before the outcome of the Federal Reserve's latest monetary policy meeting.

Frankfurt's blue-chip DAX 30 index plunged 3.21% to close at 11,432.72 points, while the CAC 40 in Paris lost 2.59% to 5,039.39 points.

London's benchmark FTSE 100 fell 1.20% to end the day 6,946.28 points compared with Tuesday's closing level.

"The U.S. economy had a bad start to the year," said Berenberg senior economist Christian Schultz.

"Bad weather in the eastern parts of the country, port strikes in the west and dollar strength all combined for significant headwinds, which more than offset the tailwind from cheap oil for consumers."

The euro meanwhile climbed to a three-week peak against the dollar at $1.1064 as the greenback took a hit on the slowing US growth.

The world's biggest economy reported Wednesday first quarter GDP growth figures of just 0.2%, well below the 1.0% rate anticipated by analysts and sharply down from the 2.2% pace in the previous three months.

"What a disappointment to think the US economy barely grew at all in the first quarter with the Fed funds rate at the zero bound for more than six years now," said Briefing.com analyst Patrick O'Hare.

In response Wall Street stocks dropped as well, with the Dow Jones Industrial Average down 0.38 percent to 18,042.14 points around mid-day in New York.

The broad-based S&P 500 slid 0.44% to 2,105.35 points, while the tech-rich Nasdaq Composite Index shed 0.54 percent to 5,027.91.

Waiting for Fed

The fresh U.S. data made it more likely that the Federal Reserve, slated to announce an update to monetary policy later Wednesday, will keep plans to raise interest rates on pause for a little longer to be sure the downturn was an aberration and that the economy will resume solid growth in the current quarter.

"A stalling of U.S. economic growth at the start of the year rules out any imminent hiking of interest rates by the Fed," said economist Chris Williamson at Markit.

"The slowdown looks temporary, as a rebound from the first-quarter weakness is already being signaled by forward-looking survey data, but the sustainability of any upturn is by no means convincing yet."

On the London stock exchange, miners lit up the fallers board on the FTSE 100, as investors fretted over heavy falls for copper prices.

Antofagasta shares fell 2.24% to close at 784 pence, BHP Billiton shed 1.60% to 1,564.00  pence and Rio Tinto dropped 2.15% to 2,915.50 pence.

And British bank Barclays saw its share price slide 1.70% to 256.95 pence on the back of a grim results statement.

The scandal-hit lender warned that fines linked to its alleged role in foreign exchange market rigging could top £2.0 billion ($3.1 billion, 2.8 billion euros), after posting plunging first-quarter net profits.

The British lender added it has set aside another £800 million for "investigations and litigation primarily relating to foreign exchange", taking the group's total provision to £2.050 billion.

Asian stock markets meanwhile slipped Wednesday after the weak U.S. economic data raised questions about the health of the world's top economy.

Sydney plunged 1.85% and Hong Kong dropped 0.15%, but Shanghai recovered from early losses to close flat. Tokyo was closed for a public holiday.

Copyright Agence France-Presse, 2015

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