World stocks plunge on global economic jitters

PARIS (AFP) - World markets took fright on Wednesday at new US data underscoring the fragile state of the global economy, sending European equities tumbling.

Wall Street opened sharply lower after the Commerce Department reported US retail sales dropped 0.3 per cent in September, the first drop in seven months, raising concerns even US growth may catch the cold that has hit Europe.

In Europe, London's benchmark FTSE 100 index lost 1.46 per cent to 6,299.24 points in afternoon deals, with Shire Pharmaceutical shares devastated by US giant AbbVie saying it would review its $54 billion takeover bid.

Frankfurt's DAX 30 fell 1.92 per cent to 8,655.68 points, while in Paris the CAC 40 sank 3.32 percent to 3,955.48 points, falling below the 4,000 mark for the first time since the summer of 2013.

Wall Street also fell sharply at the open on the retail sales data, but quickly cut the losses.

The Dow Jones Industrial Average stood at 16,180.17 points, down 0.83 per cent after 40 minutes of trading. The broad-based S&P 500 shed 0.84 percent to 1,862.33 while the tech-rich Nasdaq Composite Index lost 0.64 per cent at 4,201.54.

"The very bad US figures are just adding to all the bad news we've had in Europe over the past few weeks," said Saxo Banque analyst Andrea Tueni.

Other European markets followed the downward trend in mid-afternoon with Milan falling 3.39 per cent, Madrid off 2.87 per cent, and the Athens exchange's main index closing down 6.25 per cent over investors' concerns about plans to end its IMF programme early.

Eurozone countries were scheduled to submit their budgets to Brussels on Wednesday with Paris heading for a showdown over its 2015 budget which exceeds the EU deficit ceiling with an expected shortfall of 4.3 per cent of annual economic output.

In foreign exchange deals, the euro rose to US$1.2818 (S$1.64) from US$1.2663 late on Tuesday in New York, as investors interpreted the retail sales slowdown as pushing back the likely date of a interest rate hike from the US Fed.

The price of gold fell to US$1,223.50 an ounce on the London Bullion Market from US$1,234.75.

Sentiment turned sour early Wednesday in Europe after AbbVie announced overnight that it has decided to reconsider its Shire takeover deal, citing a US crackdown on tax inversions.

The new US Treasury rules are designed to curb so-called tax inversion deals, in which US companies merge with foreign businesses to relocate in a lower tax address. The loophole had threatened to slash the government's income.

Shire's share price plunged 24.82 per cent to 3,864 pence in mid-afternoon trading in London.

"News that AbbVie may not proceed with the Shire merger has sent the pharmaceuticals sector lower, but Shire is in an absolute tailspin," said Valutrades analyst Joao Monteiro.

"Combining this with woes in the petrochemicals sector, as crude prices show no signs of finding a floor, and many of London's largest stocks are sporting some healthy losses already." Oil prices also hit fresh multi-year lows on Wednesday as traders eyed plentiful crude supplies and demand fears arising from the weak global economic outlook.

Asian stock markets rose Wednesday, with bargain-hunters providing some lift after recent losses while data showing Chinese inflation at a five-year low raised hopes for fresh economy-boosting measures from Beijing.

They were reacting to Wall Street's rally on Tuesday thanks to some solid earnings reports.

Tokyo bounced back 0.92 per cent after five days of losses, helped by a weaker yen which boosts exporters, while Shanghai won 0.60 per cent and Hong Kong climbed 0.40 per cent.

A slew of weak figures out of China, Japan and the eurozone have fanned worries about the global outlook and sent investors running for the door in recent weeks, despite the US economy showing healthy growth.