European stocks retreated, with the Stoxx Europe 600 Index plunging to its lowest level in a year, amid deepening concern that the global recovery is stalling.
Mining companies Xstrata Plc and Vedanta Resources Plc retreated more than 8 percent as the S&P GSCI index of 24 commodities fell for a seventh day. Rio Tinto Group plunged 5.4 percent after posting earnings that missed analysts’ estimates.
The Stoxx 600 sank 3.4 percent to 243.3 at the 4:30 p.m. close in London for its biggest decline since May 2010. The index has declined 16 percent from this year’s high on Feb. 17 as the yield on Italian and Spanish bonds surged to records amid speculation that Europe will fail to contain its sovereign-debt crisis. The retreat has left the gauge trading at 9.9 times its companies’ estimated earnings, the cheapest since March 2009, Bloomberg data show.
“The market is driven by macroeconomic fears,” said Stephane Ekolo, chief European strategist at Market Securities in London. “There is no respite. The macro picture is leading market participants to start believing that issues such as sovereign debt, U.S. debt and commodity prices will likely dent the economic recovery.”
The Euro Stoxx 50 Index tumbled 3.3 percent, extending its slide since its Feb. 18 high this year to 21 percent, as euro-area stocks entered a bear market. The index fell for a ninth day, its longest falling streak since 2003.
The VStoxx Index, which measures the cost of protecting against a decline in shares on the Euro Stoxx 50 Index, rose for a seventh day, its longest rising streak since October 2008. The gauge surged 17 percent today to 34.63 for its biggest jump since March 16.
The European Central Bank left interest rates unchanged as economic growth slows and the region’s debt crisis spreads to Italy and Spain. ECB officials meeting in Frankfurt today kept the benchmark rate at 1.5 percent, as predicted by all 54 economists in a Bloomberg News survey.
ECB President Jean-Claude Trichet signaled at a press conference in Frankfurt that the central bank has resumed bond purchases. People with knowledge of the transactions said the ECB bought Irish and Portuguese securities.
The Bank of Japan expanded its 10 trillion yen ($127 billion) asset-purchase fund by 5 trillion yen and kept its benchmark interest rate near zero. The central bank ended its meeting a day early after authorities intervened in currency markets to stem the yen’s advance.
A measure of global equities fell 12 percent from this year’s high on May 2, entering its first so-called correction in more than a year. The MSCI All-Country World Index of stocks in developed and emerging markets slid 3.2 percent, its seventh day of losses and the biggest decline since April 2009.
Spain, Switzerland Sink
National benchmark indexes fell in all 18 western European markets. The U.K.’s FTSE 100 Index and Germany’s DAX Index slumped 3.4 percent, while France’s CAC 40 Index sank 3.9 percent.
Spain’s IBEX Index and Switzerland’s Swiss Market Index fell more than 21 percent from their peaks this year, entering bear markets. The IBEX and the SMI sank 3.9 percent and 3.6 percent, respectively.
Xstrata plunged 8.5 percent to 1,085 pence and Vedanta tumbled 9.4 percent to 1,486 pence. The S&P GSCI index of commodities retreated 3.3 percent, extending its seven-day drop to 7.4 percent. Basic-resource shares declined 5.5 percent, the largest retreat of the 19 industry groups in the Stoxx 600.
Rio Tinto, Veolia
Rio Tinto slid 5.4 percent to 3,796.5 pence after the mining company reported first-half net income of $7.6 billion. Analysts had expected earnings of $8.3 billion. The company increased its share buyback by $2 billion to $7 billion, stating it would be completed by the end of the first quarter of 2012.
Veolia Environnement SA tumbled 19 percent to 11.60 euros, the lowest price since its initial public offering in 2000, on concern that the world’s largest water company will cut payouts to shareholders following a first-half loss.
Inmarsat Plc plunged 19 percent to 394.5 pence, the biggest drop since its IPO in 2005. The largest provider of satellite services to the maritime industry cut its projection for its core mobile satellite services business as “near-term factors will constrain growth for longer than previously anticipated.”
Givaudan SA dropped 7.7 percent to 760 Swiss francs. The maker of the fragrances for Marc Jacobs’s Lola and Paco Rabanne’s 1 Million perfumes reported first-half earnings that missed analyst estimates as higher raw-material costs hurt profitability.
Hexagon AB tumbled 15 percent to 105.80 kronor. The world’s biggest maker of measuring instruments posted second-quarter net income of 76.3 million euros. Analysts had estimated net income of 81.4 million euros, according to a survey compiled by Bloomberg.