European stocks plunge on growth fears; DAX tumbles 3.5%

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Forexpros - European stock markets were sharply lower on Thursday, as lingering concerns over the euro zone's sovereign debt crisis and mounting fears over the global economic outlook prompted investors to shun riskier assets.

During European morning trade, the EURO STOXX 50 sank 3%, France's CAC 40 dropped 2.5%, while Germany's DAX 30 plunged 3.5%.

Concerns over the economic outlook for the euro zone were underscored after European Central Bank Governing Council member Ewald Nowotny said that he was more concerned about entering a phase of slow growth and low inflation than the risks posed by high inflation.

Nowotny added that growth in the U.S. was likely to continue, albeit at a more modest pace than previously expected.

Meanwhile, global financial service providers Deutsche Bank and Morgan Stanley cut their forecast for Chinese economic growth, while Morgan Stanley also lowered its outlook for global growth, citing an "insufficient policy response to Europe's sovereign debt crisis, weakened confidence and the prospect of fiscal tightening".

Shares in the financial sector posted sharp losses, with French banks Societe Generale and BNP Paribas tumbling 5.2% and 3.3%, while German lenders Deutsche Bank and Commerzbank fell 4.1% and 4.7% apiece.

Peripheral lenders were also down heavily, with Unicredit shares dropping 4.1%, Intesa Sanpaolo down 5.15%, while Spanish lender Banco Santander was down 3.2%.

In London, the commodity-heavy FTSE 100 fell 2.1% as shares in raw material producers led losses amid the uncertain global economic outlook.

Mining giants BHP Billiton and Rio Tinto dropped 2.65% and 4.5% respectively, copper producers Xstrata and Kazakhmys saw shares tumble 5.5% and 4.7%, while oil majors British Petroleum and Royal Dutch Shell retreated 1.6% each.

Meanwhile, U.K. lenders tracked their European counterparts lower, with Barclays tumbling 5.1%, Royal Bank of Scotland dropping 4.2%, while Lloyds Banking Group slumped 3.85%.

The outlook for U.S. equity markets was sharply lower ahead of earnings reports from the largest U.S. personal computer maker Hewlett-Packard, clothing retailer GAP, software manufacturer, as well as retail conglomerate Sears.

The Dow Jones Industrial Average futures pointed to a drop of 1.65%, the S&P 500 futures tumbled 2%, while the Nasdaq 100 futures sank 2.25%.

Later in the day, the U.S. was to publish a flurry of economic data, which will help traders gauge the strength of the U.S. economic recovery.

The country was to produce government reports on initial jobless claims, consumer price inflation, existing home sales, manufacturing activity in Philadelphia as well as a report on natural gas stockpiles.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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