Stocks sink on Fed's grim outlook for US economy

Eurostoxx 50: 1,995.75 (–102.74) Frankfurt DAX: 5,164.21 (–269.59) Paris CAC: 2,781.68 (–154.14)EUROPEAN STOCKS tumbled to a two-year low yesterday, as the Federal Reserve signalled "significant downside risks" to the world's largest economy and Moody's Investors Service downgraded three US banks.

“To have a chance to resolve the European debt situation, we need world growth to remain robust,” said Jean-Paul Jeckelmann, chief investment officer at Banque Bonhote and Cie. in Neuchatel, Switzerland.

“Any sign that this growth is at risk will shake markets. The word ‘significant’ used by the Fed is pretty strong and is contrasting with previous declarations that were much more constructive,” he said.

Moody’s downgraded the long-term credit ratings of Bank of America, Wells Fargo, along with Citigroup’s short-term rating, saying US support has become less likely if lenders get into financial trouble.

Greece said it will accelerate budget cuts, targeting civil servants’ wages and pensioners to keep emergency loans flowing and avoid default, following two rounds of talks with the European Union and the International Monetary Fund.

Logitech fell 11 per cent to 6.95 Swiss francs, the biggest decline since April.

A gauge of mining companies in the Stoxx 600 plunged the most since December 2008 as copper fell to the lowest in almost a year.

Rio Tinto and larger rival BHP Billiton sank 10 per cent to 3,035p and 8.2 per cent to 1,734.50p, respectively.

Antofagasta fell 12 per cent to 980.5p, the company’s biggest drop since December 2008.

Kenmare Resources decreased 8.3 per cent to €46.10.

Vedanta Resources slid 11 per cent to 1,142p.

LVMH, the maker of Celine handbags and TAG Heuer watches, tumbled 6.2 per cent to €106.85.

BNP Paribas, France’s biggest bank, retreated 4.4 per cent to €23.37.

Société Générale, France’s second-largest bank by assets, slid 9.2 per cent to €15.37.

EADS slid 7.6 per cent to €20.97. BNP Paribas and Société Générale have stopped lending to aircraft purchasers because of difficulties in obtaining dollar financing, Les Echos said. – (Bloomberg)