EUROPEAN stocks suffered losses yesterday as EU officials cut their economic growth forecasts for the Eurozone.
The European Commission forecast 1.1 per cent growth in the currency union in 2015 in a report released yesterday, down from 1.7 per cent six months ago.
Germany, the Eurozone’s largest economy, had its 2015 growth slashed from two per cent to 1.1 per cent. France’s 2015 growth outlook was cut from 1.5 per cent to 0.7 per cent. Spain and Italy also had their growth forecasts cut.
The German Dax share index closed at a loss of 0.92 per cent while the French Cac lost 1.5 per cent.The Eurozone economy grew by only 0.1 per cent in the second quarter of 2014 and is now in danger of falling into a triple dip recession. There has been a marked impact on European stock markets, especially over the last month.
The Standard and Poor’s (S&P) Europe 350 index – a basket of shares from across Europe – has seen volatility nearly triple since September to levels not seen for two years. The degree to which stocks move together – the correlation – is close to its highest level since 2007.
“High correlations and high volatility tend to persist in the short term; elevated levels of both lead to a highly unstable market. Don’t be surprised if there are some bigger bumps down the road,” said Tim Edwards, a director at S&P Dow Jones Indices.