European stocks extended their recent slide on Monday, as
concerns over global growth that have rocked markets in recent days
showed little sign of easing.
The Stoxx Europe 600 index was 0.6% lower in early trade,
following a 4% decline last week. European markets picked up Monday
where Wall Street left off on Friday, when a steep fall for the Dow
Jones Industrial Average erase its gains for the year.
The selling also continued in Asia on Monday, with the biggest
drop in Taiwan stocks since 2012 leading declines.
Behind the global downturn are growing fears that growth around
the world isn't living up to investors' expectations earlier this
year.
"There is not a great deal to be hugely optimistic about as we
go deeper into the fourth quarter," said strategists at Rabobank,
highlighting "ultraslow" growth in Europe, a cooling of the economy
in China, a fading recovery in Japan, and monetary policy in the
U.S. that has been slow to wake up to weakness elsewhere.
In Europe in particular, investors are worried that a stagnating
economy will hold back profit growth.
"This retreat looks like an unwind of the multiple expansion,
which priced in better earnings news that has been slower to arrive
than hoped, " said Ian Williams, an economist and strategist at
brokerage Peel Hunt.
Underscoring worries about the strength of the European economy,
Standard & Poor's Ratings Services lowered its outlook on
France's AA credit rating to negative from stable on Friday. The
change in the outlook comes as the French government itself
acknowledges that weak economic growth has undermined its budget
plans and the budget deficit will run higher than promised earlier
this year.
In currency markets, the dollar edged lower. The buck's strong
rally has been interrupted in the past week as the growth fears
spread to U.S. markets. That has driven down short-term bond yields
in the U.S. making the dollar less attractive.
The euro was 0.2% higher against the dollar at $1.2656 early
Monday, while sterling and the yen also chalked up small gains.
"While we think this was very much a temporary setback for
dollar bulls, further progress will be difficult until U.S.
front-end yields manage a recovery," said currency strategists at
BNP Paribas.
In bond markets, the selloff in risky assets boosted German
debt, which is perceived by investors to be safe, pushing 10-year
bond yields dow to 0.88%, close to their recent record low.
Write to Tommy Stubbington at tommy.stubbington@wsj.com
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