European stocks drop as fears over global slowdown gather pace

Guy Bentley
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Markets slide over global growth fears (Source: Getty)

European markets are taking a beating with fears over the global recovery and impact of the Ebola crisis hitting investor confidence.

The FTSE 100 dropped 1.6 per cent, with France's CAC taking an even bigger hit shedding almost two per cent. Germany's DAX has lost 1.3 per cent.

Anxiety over the health of the Eurozone was not helped by inflation figures showing annual growth of a mere 0.3 per cent. The US Treasury warned yesterday that "Europe faces the risk of a prolonged period of substantially below-target inflation or outright deflation".

Borrowing costs for Greece and Italy are on the up as investors turn to gold. Precious metal miners Fresnillo and Randgold Resources are also seeing a boost from the flight away from riskier investments.

The International Monetary Fund recently painted a gloomy picture for Europe's economic outlook forecasting a 40 per cent chance of the Eurozone entering recession.

Worries also abound over the ending of the Federal Reserve's quantitative easing programme. Michael Hewson of CMC markets wrote this morning:

QE was a signal for the beginning of a potential normalisation of monetary policy has seen the blinkers come off in a lot of circles, and as the monetary morphine has started to wear off the patient has come to realise that a lot of the old problems still remain, and yesterday’s poor US data helped trigger a rather extreme reaction in not only the stock markets but bond markets too, as complacent investors rushed to hedge themselves.

Yesterday, The FTSE 100 suffered its biggest one-day fall this year, shedding £46bn in value closing 2.8 per cent down. Commodities and banks bore the brunt of the fall. The losses came in the wake of falling US inflation and retail sales.

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