European equities tumble further as Germany's DAX heads for bear market

A trader works at his desk in front of the DAX board at the Frankfurt stock exchange, Germany, August 24, 2015. PHOTO: REUTERS
A trader works at his desk in front of the DAX board at the Frankfurt stock exchange, Germany, August 24, 2015. PHOTO: REUTERS

BERLIN (BLOOMBERG) - The European rout is getting worse, with equities tumbling for a fourth day and Germany's benchmark gauge heading for a bear market.

All but four shares in the Stoxx Europe 600 Index fell as the gauge deepened its plunge after its worst week in four years. It slid 3.4 per cent at 12:05 p.m. in London (7.05 pm Singapore time), with miners leading the plunge in industry groups as commodities were set for their lowest levels since 1999. Germany's DAX Index sank 3.1 per cent, down 21 per cent from its peak.

The rout that began with the devaluation of China's currency has sent the Stoxx 600 into a correction, closing 13 per cent lower than the record it reached in April. Thirteen out of 18 western-European markets have fallen 10 per cent or more from their high, and the volume of Stoxx 600 shares changing hands almost double the 30-day average on Monday.

"Today everyone seems to be selling off, and there's panic, there's no rational choice anymore, no rational reaction," according to Michael Woischneck of Lampe Asset Management GmbH, who helps oversee 6.2 billion euros (S$9.99 billion). "There wont be a rebound today. The Americans will add to the European selling pressure in the afternoon, and that may drive us even lower."

The DAX, one of the biggest gainers at the start of the year, will be among the most hit due its exposure to China, Mr Woischneck said. If it closes at the current level, it will be the first to enter a bear market among western-European gauges.

All of the region's national stock measures fell more than 2.5 per cent. The U.K.'s FTSE 100 Index is heading for its lowest level since 2012 and briefly dropped below 6,000. Glencore Plc and BHP Billiton Ltd. tumbled more than 6 per cent.

Abengoa SA was among the only Stoxx 600 companies rising. A report said one of its shareholders repaid a loan and the shares used as collateral were freed. Modern Times Group AB gained 2.6 per cent after the Swedish media firm said it will cut jobs.

More than US$5 trillion (S$7 trillion) have already been wiped out from the value of global stocks since China unexpectedly devalued the yuan, raising concern over a global economic slowdown. The panic intensified at the end of last week, when U.S. equities, which had remained relatively stable, tumbled as investors dumped the biggest winners of 2015.

The rout sent the Stoxx 600's valuation to a seven-month low of 15.4 times estimated earnings on Friday, compared with 17.4 times in April, after the European Central Bank began quantitative easing to support the economy.

On Monday, the benchmark gauge went as low as 347.8, or about 32 points away from its 200-day moving average, the widest gap since October. It has reached a level in price chats indicating that it's dropped to much and may rebound. Its relative strength index was at 22.1, the lowest since October.

"Genuine relief will only come when there is evidence that the growth of world output and trade is reviving," according to a Kepler Cheuvreux report e-mailed on Monday. "We want to remain exposed to Europe's domestic and regional growth plays."