European Stocks Fall on Eurozone Fears -- Update

By Tommy Stubbington 

European shares fell Tuesday, rattled by the latest sign that the eurozone economy is stagnating.

The Stoxx Europe 600 index was 1.0% lower midmorning, deepening Monday's decline.

The fall came after data firm Markit's monthly composite purchasing managers index--a measure of activity in the manufacturing and services sectors in the currency bloc--for September fell to 52.3 from 52.5. The figure was the lowest level in 2014 to date. A reading below 50.0 indicates activity is declining, while a reading above that level indicates it is increasing.

The data are likely to put further pressure on the European Central Bank to come up with fresh stimulus measures to prop up the flagging recovery. ECB President Mario Draghi signaled Monday that the central bank remains open to a program of quantitative easing if inflation stays too low.

"If there's too much bad news the prospect of more from the ECB isn't enough to hold up markets. We already had a lot of QE optimism in the price," said Christian Stocker, an equity analyst at UniCredit.

The latest disappointment for the eurozone overshadowed a positive lead from Asian markets, where shares rallied after better-than-expected Chinese manufacturing data. Worries about slowing growth in China had been behind Monday's declines, which were led by mining stocks as metals prices took a pummeling.

Mining firms outperformed the wider market Tuesday, with the Stoxx Europe 600 basic resources falling just 0.4%.

"Although the data offer some near-term relief, China's growth concerns are likely to continue to weigh the markets," said analysts at Barclays.

The Australian dollar also staged a modest comeback, rising 0.3% to $0.890 after tumbling to a seven-month low on Monday, pressured by the slump in commodity prices.

France continued to lag behind other economies in the region, with data there pointing to a deepening slump in business activity.

French shares led declines, with the CAC 40 down 1.5%. Germany's DAX fell 1.0%.

U.S. stocks were poised to extend Monday's decline, with futures pointing to a 0.2% opening loss for the S&P 500. Changes in futures aren't necessarily reflected in market moves after the opening bell.

In the U.K., the FTSE 100 lost 1.1%. The index was weighed down by declines in a number of firms viewed as likely takeover targets for U.S. companies. The losses, which hit shares in pharmaceutical firms Shire and AstraZeneca, came after the U.S. Treasury Department on Monday tightened tax rules to deter U.S. companies from moving their legal headquarters to lower-tax jurisdictions in so-called inversion deals.

Elsewhere, shares in Austrian bank Raiffeisen tumbled after it issued a profit warning due primarily to the Ukraine crisis.

U.K. food ingredients manufacturer Tate & Lyle also fell sharply after saying profit for the year will be lower than previously expected.

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