London:
Worries about Europe's economic health sent shares, commodities and the single currency lower on Thursday, extending losses caused by growing uncertainty over the US Federal Reserve's future monetary policy.
The combination of factors put the MSCI world equity index on course for its biggest daily loss of the year, sent oil sliding towards $114 a barrel, and saw the dollar hit a three-month high against a basket of major currencies.
US stock index futures pointed to a lower start on Wall Street when it reopens, with the S&P 500 index poised to follow its biggest daily fall in three months on Wednesday with more losses.
The latest bout of selling was triggered by surprisingly weak euro zone Purchasing Managers Index (PMI) data for February which dashed hopes of an early recovery for the recession-hit region.
Economists had expected the PMIs, a leading indicator of economic activity based on surveys of businesses, to add to other tentative signs of a recovery. But instead they pointed to a sizeable first-quarter contraction of up to 0.3 per cent.
"The expectation was the trend of improvement for the euro zone as a whole would continue and it hasn't, so that is a disappointment," said BNP Paribas economist Ken Wattret.
The euro tumbled to a fresh six-week low below $1.32 on the news, having already suffered at the hands of a resurgent greenback following the signals from the US Federal Reserve on Wednesday that it was considering an end to monetary stimulus.
Signs that Fed policymakers were becoming increasingly reluctant to continue aggressive monetary easing, revealed in the minutes of the last policy meeting, had sparked a worldwide selloff in riskier asset markets.
Europe's Eurofirst 300 index shed 1.2 per cent, close to its biggest daily loss of the year so far, while London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX were as much as 1.8 per cent lower.
Safety plays well
In the fixed income market, worries about the growth outlook in Europe and further Fed bond buying sent safe-haven German debt to some of the highest levels seen for a month.
The main Bund futures contract was 80 ticks up at 143.20, reversing the fall seen on Wednesday and supported by the approach of an Italian general election this weekend.
Confidence in Italy has been shaken in the run-up to the voting, after a strong campaign by former Prime Minister Silvio Berlusconi that has opened up the three-way race with outgoing premier Mario Monti and centre-left leader Pier Luigi Bersani.
Italian 10-year yields were 4.5 basis points higher on the day at 4.47 per cent, while Milan's blue-chip share index was down 3 per cent, underperforming the already weak markets across Europe.
The dollar, another safety play, followed up its big gains on Wednesday adding a further 0.35 per cent on an index value that includes most major currencies, although it slipped 0.5 per cent against the yen to 93.
Divergence grows
The Markit composite PMI for the euro zone, which combines both services and manufacturing surveys, fell to 47.3 in February from 48.6. It had been expected to rise to 49.0. The data also showed a growing gap between Germany and France - the two biggest economies - which may have implications for the European Central Bank's monetary policy.
The survey found firms in Germany are enjoying a healthy rate of growth, while French service sector companies are in the midst of their worst slump since the financial crisis was at a peak in early 2009.
ECB Bank president Mario Draghi has said the euro's exchange rate was important for growth and inflation and the bank is already monitoring the economic impact of the euro's strength.
Commodities retreat
In commodity markets, the prospect of weakening demand from China, a possible early end to the Fed's policy of quantitative easing and the stronger dollar sent all markets lower.
London copper struck its lowest in nearly two months, at $7,863.50 a tonne, while oil dropped below $114.50 a barrel for the first time this month, having seen its biggest daily fall of the year on Wednesday.
"Long-position holders have been looking to sell for profit-taking," said Yusuke Seta, a commodity sales manager at Newedge Japan. "I guess this is a good time to sell."
Copyright @ Thomson Reuters 2013
The combination of factors put the MSCI world equity index on course for its biggest daily loss of the year, sent oil sliding towards $114 a barrel, and saw the dollar hit a three-month high against a basket of major currencies.
US stock index futures pointed to a lower start on Wall Street when it reopens, with the S&P 500 index poised to follow its biggest daily fall in three months on Wednesday with more losses.
The latest bout of selling was triggered by surprisingly weak euro zone Purchasing Managers Index (PMI) data for February which dashed hopes of an early recovery for the recession-hit region.
Economists had expected the PMIs, a leading indicator of economic activity based on surveys of businesses, to add to other tentative signs of a recovery. But instead they pointed to a sizeable first-quarter contraction of up to 0.3 per cent.
"The expectation was the trend of improvement for the euro zone as a whole would continue and it hasn't, so that is a disappointment," said BNP Paribas economist Ken Wattret.
The euro tumbled to a fresh six-week low below $1.32 on the news, having already suffered at the hands of a resurgent greenback following the signals from the US Federal Reserve on Wednesday that it was considering an end to monetary stimulus.
Signs that Fed policymakers were becoming increasingly reluctant to continue aggressive monetary easing, revealed in the minutes of the last policy meeting, had sparked a worldwide selloff in riskier asset markets.
Europe's Eurofirst 300 index shed 1.2 per cent, close to its biggest daily loss of the year so far, while London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX were as much as 1.8 per cent lower.
Safety plays well
In the fixed income market, worries about the growth outlook in Europe and further Fed bond buying sent safe-haven German debt to some of the highest levels seen for a month.
The main Bund futures contract was 80 ticks up at 143.20, reversing the fall seen on Wednesday and supported by the approach of an Italian general election this weekend.
Confidence in Italy has been shaken in the run-up to the voting, after a strong campaign by former Prime Minister Silvio Berlusconi that has opened up the three-way race with outgoing premier Mario Monti and centre-left leader Pier Luigi Bersani.
Italian 10-year yields were 4.5 basis points higher on the day at 4.47 per cent, while Milan's blue-chip share index was down 3 per cent, underperforming the already weak markets across Europe.
The dollar, another safety play, followed up its big gains on Wednesday adding a further 0.35 per cent on an index value that includes most major currencies, although it slipped 0.5 per cent against the yen to 93.
Divergence grows
The Markit composite PMI for the euro zone, which combines both services and manufacturing surveys, fell to 47.3 in February from 48.6. It had been expected to rise to 49.0. The data also showed a growing gap between Germany and France - the two biggest economies - which may have implications for the European Central Bank's monetary policy.
The survey found firms in Germany are enjoying a healthy rate of growth, while French service sector companies are in the midst of their worst slump since the financial crisis was at a peak in early 2009.
ECB Bank president Mario Draghi has said the euro's exchange rate was important for growth and inflation and the bank is already monitoring the economic impact of the euro's strength.
Commodities retreat
In commodity markets, the prospect of weakening demand from China, a possible early end to the Fed's policy of quantitative easing and the stronger dollar sent all markets lower.
London copper struck its lowest in nearly two months, at $7,863.50 a tonne, while oil dropped below $114.50 a barrel for the first time this month, having seen its biggest daily fall of the year on Wednesday.
"Long-position holders have been looking to sell for profit-taking," said Yusuke Seta, a commodity sales manager at Newedge Japan. "I guess this is a good time to sell."
Copyright @ Thomson Reuters 2013
