advertisement

Stoxx 600 Heads for Worst Day Since '09

European stocks are heading for their worst plunge since 2009, with Germany's benchmark gauge set to enter a bear market.

All but two shares in the Stoxx Europe 600 Index fell as the gauge deepened its plunge after its worst week in four years. It slid 4.9 percent at 3:34 p.m. in London, and dropped as much as 8.1 percent, with miners leading the plunge in industry groups as commodities were set for their lowest levels since 1999. Germany's DAX Index sank 4.6 percent, down 22 percent from its peak.

The rout that began with the devaluation of China's currency has sent the Stoxx 600 into a correction, closing 13 percent lower than the record it reached in April. Thirteen out of 18 western-European markets have fallen 10 percent or more from their high, and the volume of Stoxx 600 shares changing hands was 156 percent greater than 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 ($7.1 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, Woischneck said. Portugal's PSI 20 Index is also about to enter a bear market.

FTSE 100 Slump

All of the region's national stock measures fell more than 2.5 percent. The U.K.'s FTSE 100 Index is heading for its lowest level since 2012 and dropped below 6,000. Glencore Plc and BHP Billiton Ltd. tumbled more than 6.5 percent.

Abengoa SA was among the only Stoxx 600 companies rising, up 5.2 percent. A person familiar with the matter said one of its shareholders paid back a loan, freeing all the shares used as collateral.

More than $5 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.

Technical Levels

The Stoxx 600 went as low as 331.98 on Monday. It has reached a level in price charts indicating that it's dropped too much and may rebound. Its relative strength index was at 20.8, 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 today. "We want to remain exposed to Europe's domestic and regional growth plays."

Kepler downgraded technology companies to underweight and banks to neutral, while upgrading utilities to neutral and real estate firms to overweight.

To contact the reporter on this story: Camila Russo in Madrid at crusso15bloomberg.net To contact the editors responsible for this story: Cecile Vannucci at cvannucci1bloomberg.net Namitha Jagadeesh

Why stocks are tumbling 6 years into the bull market

New day of carnage for financial markets amid global sell-off

Stock market decline eases after morning plunge

Article Comments
Guidelines: Keep it civil and on topic; no profanity, vulgarity, slurs or personal attacks. People who harass others or joke about tragedies will be blocked. If a comment violates these standards or our terms of service, click the "flag" link in the lower-right corner of the comment box. To find our more, read our FAQ.