LONDON--Europe's leading stock markets fell sharply on Wednesday as deflation worries swept across the region, while tumbling commodity prices sent mining and oil share prices crashing.
In afternoon deals, London's FTSE 100 index slumped 2.30 percent compared with Tuesday's close to stand at 6,391.60 points, as shares in mining groups collapsed after copper prices slumped to near six-year low points.
Crude futures were stuck around the lowest levels since 2009.
Frankfurt's DAX 30 shares index shed 0.97 percent to 9,844.83 points and the CAC 40 in Paris fell 1.22 percent in value to 4,237.76.
"Stock markets seem to be torn a bit at the moment between anticipation that the ECB will implement some form of QE (stimulus) as early as their next meeting on the 22nd January and increasing global growth concerns which explains the heightened intra-day volatility seen over the past few days," said Markus Huber, senior analyst at broker Peregrine & Black.
The rate of return on 10-year French government bonds fell to a record low level Wednesday in the wake of weak inflation data and as expectations mount that the European Central Bank will unveil more stimulus at its policy meeting next week.
The yield on German, Italian and Spanish bonds also fell.
ECB president Mario Draghi said the central bank does not have many options left apart from sovereign bond purchases to ward off deflation in the euro area.
One possible problem for an ECB stimulus programme of a large-scale buying of government bonds known as quantitative easing or "QE" was removed on Wednesday.
A senior lawyer at the EU's top court found that a hugely controversial earlier bond-buying programme readied by the European Central Bank is legal.
Advocate General Cruz Villalon at the European Court of Justice said in an opinion that the programme was "in principle" in accordance with European treaties, after a legal challenge by German politicians and academics who charged the ECB was overstepping its powers.
"The reason why this ruling was so important was because of the implications it could have had for QE, which the ECB is expected to announce next week," said Craig Erlam, market analyst at Alpari trading group.
- Copper tumbles -
The euro firmed despite rising expectations that the ECB would pump more money into the economy, rising to $1.1791 from $1.177 late in New York on Tuesday, when also the World Bank cut its global growth forecast for this year to 3.0 percent from 3.4 percent.
For developing countries which have been the biggest contributors to global growth in recent years, the World Bank cut its 2015 forecast by 0.6 percentage points to 4.8 percent.
The price of copper tumbled Wednesday in reaction.
Copper for delivery in three months plunged in Asian trading hours to $5,353.25 per tonne, a level last seen in July 2009. That marked an 8.0 percent slide from Tuesday's close.
"With little respite for investors amid deflation concerns and the World Bank lowering its outlook for the growth prospects of the global economy, the volatility of late is set to continue," said Andy McLevey, head of dealing at stockbroker Interactive Investor.
Mining companies saw their share prices dive Wednesday, with Glencore plunging nearly 9.5 percent to 243.80 pence, Anglo American tumbling 9.2 percent and BHP Billiton retreating 6.3 percent.
- Oil slips -
World oil prices meanwhile remained close to six-year low levels after major crude producers stressed they would maintain output levels despite global oversupply, while traders awaited the latest update on US crude inventories.
AFP
