By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets slumped on
Thursday, tracking sharp losses in Asia and the U.S., after the
World Bank cut its 2013 global growth estimate and investors
worried about a reduction of central-bank stimulus.
The Stoxx Europe 600 index slid 1.1% to 287.58, on track for a
fourth straight day of losses.
The index has lost more than 4% in June to date, with investors
worried central banks will start to scale back stimulus measures,
which have been widely credited for the sharp rally earlier in the
year.
"We're still in a world where the main driver for market
direction is what central banks are saying and doing, and you can't
ignore that. The past two-to-three weeks prove that," said Neil
Wilkinson, senior fund manager at Royal London Asset
Management.
"The corporate news flow is quiet after the first-quarter
earnings season ended, and with a lack of hard data, markets are
prone to speculate about the Fed. Another key point is that volumes
are thin, hence any moves are amplified," he added.
Among major movers in the pan-European index, shares of Royal
Bank of Scotland Group PLC (RBS) dropped 5.8% after the bank said
late Wednesday that Chief Executive Stephen Hester will step down
at the end of the year.
Other banks were also lower, with shares of Banco Popular
Español SA off 2.9%, Deutsche Bank AG (DB) 1.5% lower and Société
Générale SA down 1.6%.
The sharp losses unfolded on the back of weak trading sessions
in the U.S. and Asia, where stocks sank on continuing concerns the
U.S. Federal Reserve will soon withdraw its massive liquidity
injections. The Dow Jones Industrial Average (DJI) posted its
longest losing streak for the year on Wednesday. And overnight in
Asia, Japanese stocks plunged 6.4%, as a rally in the yen trashed
exporters.
Additionally, the World Bank cut its economic-growth forecast to
2.2% expansion in 2013, down from a 2.4% projection issued in
January and below last year's estimate of 2.3% growth.
Later on Thursday, attention turns to retail-sales data and
jobless-claims figures from the U.S. Data from the world's largest
economy have been in the spotlight after Fed Chairman Ben Bernanke
in May said the central bank could start tapering its bond
purchases in coming months if data continue to improve. The
policy-setting committee meets next week, but is widely expected to
keep its easing program on hold.
"If the selloff continues, we might get some soothing comments
out of the Fed about QE and might get comments from Bernanke that
'I did say sustainable improvement and we haven't seen that,'"
Wilkinson from Royal London Asset Management said.
"If we get soothing comments from the FOMC meeting, we'll get a
kickback [in markets] pretty rapidly ... If we don't get anything
from the meeting next week, the question is how far will this
selloff go," he added.
U.S. stock futures pointed to a lower open on Wall Street.
Back in Europe, Germany's DAX 30 index dropped 1.5% to 8,022.64,
after slipping below the 8,000 level for the first time since early
May.
France's CAC 40 index lost 0.8% to 3,763.09, while the U.K.'s
FTSE 100 index gave up 1% to 6,239.40.
Outside the major indexes, shares of private-hospital operator
Rhoen-Klinikum AG surged 8.5% after shareholders agreed to change
the firm's strict voting statutes.
Banco Santander SA (SAN) lost 1.3% after J.P. Morgan Cazenove
cut the Spanish bank to underweight from neutral.
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