European Stocks Sink on Bearish Mood Ahead of ECB, BOE
European stocks fell on Wednesday after U.S. pending home sales data came in lower than expected and with investors cautious ahead of rate-setting meetings by the European Central Bank and the Bank of England on Thursday.
Data showing that job creation in the U.S. private sector rose at its slowest pace in over four years in August contributed to the deepening of the bearish mood.
The Paris CAC-40 ,Frankfurt DAX and London FTSE-100 were firmly lower, as was the FTSE CNBC Global 300 .
All sectors were in the red, with the financial sector again bearing the brunt and falling by as much as 9.8%.
In Frankfurt, Commerzbank shares fell by 2.4% despite a bullish statement in a German paper by CEOKlaus-Peter Mueller that the bank was interested in buying a 38% stake of WestLB, while Deutsche Bank shares fell by 1.9%.
Shares of U.K. bank Barclays were 2.8% down, while French bank BNP Paribas fell by 2.7%. There were some good corporate news in other sectors but they failed to lift spirits.
Booming demand at ABB helpedthe Swiss engineering group double its medium-term sales target and it announced it was looking for acquisitions. Shares fell 4% despite the bullish statement, following the general trend of the market.
Analysts said stocks were hurt by persistent fears in the market that were likely to continue.
"The fact remains that until we know exactly the damage caused by subprime lending and all the derivatives that go with it, we are going to have these gigantic, seismic waves of volatility," David Buik, from BGC Partners, told "European Closing Bell."
He said the Bank of England's intervention did little to appease money market woes, with three-month LIBOR rates climbing as high as 6.8%.
All eyes will turn to key rate-setting meetings by the European Central Bank and the Bank of England on Thursday. Both are expected to keep rates unchanged to help ease the current turmoil, but some analysts say even this may not be enough to ease interbank lending conditions.
"The only thing left for them (central banks) to do is take some of the paper that banks don't want to take from each other," Trevor Williams, Chief Economist at Lloyds TSB, told "European Closing Bell." But, he added, central banks may be reluctant to do that because they don't know either how much the paper used as collateral by banks is worth.