European shares fall after heavy losses in Asia and the US

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Dow Jones 17079.57 Down -42.44 -0.25%
Nasdaq 4557.69 Down -11.93 -0.26%
S&P 500 1996.74 Down -3.38 -0.17%
FTSE 100 6805.80 Down -24.86 -0.36%
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BBC Global 30 7371.47 Up 0.33 0.01%

Stock markets across Europe have fallen, following steep declines in Asia and the US.

The UK's FTSE 100 index was down 0.3%, Germany's Dax index dropped 1% and France's Cac 40 was trading 0.2% lower in lunchtime trade.

Investors have been rattled by weak factory data from both the US and China - the world's two biggest economies.

On Monday, the main US stock indexes fell by more than 2%, and Japan's Nikkei dived 4.2% on Tuesday.

'General slowdown'

On Monday, a report from the Institute for Supply Management (ISM), a trade group of purchasing managers, suggested that the US manufacturing sector had barely grown last month.

The ISM's index of manufacturing activity fell to 51.3 in January from 56.5 in December.

Start Quote

Investors had expectations going into 2014 of a much stronger US economic recovery than actually what we're seeing”

End Quote Chris Gaffney Senior market strategist, EverBank

It was the lowest reading since May, triggering concerns that the US economy might be starting to weaken.

Meanwhile, official data released over the weekend showed that China's manufacturing activity hit a five-month low in January.

"The data was very weak across the board - it's hard to find any good news in there. It looks like a general slowdown," said Paul Zemsky, head of asset allocation at ING Investment Management.

"Combine that with the fact emerging market currencies continue to sell off, and things don't look too good for the market now."

'Reset expectations'

Fears of a slowdown in the US economic recovery were fanned further by a fall in car sales - which dropped 3% in January from a year ago.

General Motors saw its sales tumble 12% in January, while Ford's deliveries dropped 7%.

The decline led to shares in both carmakers falling by more than 2% on Monday.

"Investors had expectations going into 2014 of a much stronger US economic recovery than actually what we're seeing and we've had to reset our expectations,'' said Chris Gaffney, a senior market strategist at EverBank.

At the same time, many analysts have predicted that global markets are due for a correction, not least because of the sharp rise that has been seen over the past few months.

"What we're seeing in the markets so far this year may not be investors panicking about the turmoil in emerging markets, or the ongoing weaknesses in corporate earnings, or even the poor data coming out of the US for December and January," Craig Erlam, a market analyst at Alpari, told the Reuters news agency

"Instead, I believe these are all simply being used as an excuse for investors to allow for the significant correction that many investors have been calling for, for a number of months now."

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