Europe close: Stocks reel amid Italian budget stand-off, weakness overseas
Stocks fell sharply after the European Union rejected the Italian government's budget proposals and as investors try to front-run the risk of another leg lower in risk assets globally.
In an unprecedented move, the European Commission sent officials in Rome back to the drawing board, telling them that their draft budget for 2019 "presents a particularly serious deviation" from its recommendations last July and that it was "not in-line" with the country's previously acquired commitments both with itself and with the broader EU, giving Rome three weeks to respond.
Commenting on the price action in markets, Josh Mahony at IG said: "The sellers are back in the driving seat today, as hopes of a recovery seen throughout the past week are swiftly dashed in favour of yet another bout of selling. Much of the selling had its footing in the sharp deterioration in China overnight, with a 3% decline in Chinese stocks coming after markets cast doubt over whether the recent measures are going to be enough to paper over the cracks in their economy amid the recent trade war.
"Italian fears remain one of the key drivers of downside for European stocks, with the somewhat predictable European Commission rejection of the proposed Italian budget raising fears over a potentially drawn out and harmful clash between the EU and its third largest economy."
Investors were also treading cautiously ahead of a barrage of central bank policy meetings around the world, including the European Central Bank's on Thursday, and a spate of quarterly results from America's tech giants all at the end of the week.
Ratings agency Standard&Poor's was also due to release the results of its review of Italy's sovereign debt ratings on Friday.
Against that backdrop, the benchmark Stoxx 600 fell 1.58% or 5.68 points to 354.06, alongside a 2.17% drop for the German Dax to 11,274.28, while the Cac-40 was off by 1.69% to 4,967.69.
To take note of, Paris's Cac-40 plumbed a fresh 52-week low on Tuesday, joining the Dax, which had already done the same roughly one week earlier.
Commodities were also lower, dented by the souring sentiment, with front month Brent crude oil futures for prompt month delivery retreating by 4.2% to $76.69 per barrel on the ICE.
Tellingly perhaps, December gold futures on COMEX added 0.91% to $1,235.80/oz..
Technology stocks were at the bottom of the pile, with the corresponding Stoxx 600 sector gauge retreating 3.73% to 414.42, alongside a drop of 2.60% to 329.59 for the Oil&Gas sector index.
Euro/dollar did however did however manage to eke out a gain of 0.18% to change hands at 1.14864.
Tuesday's economic calendar was rather light, aside from the expected response from Brussels to Rome's budget proposals.
In economic news, the European Commission reported a 0.2 point gain in its euro area consumer confidence index for the month of October to -2.7 (consensus: -3.0).
On the corporate side of things, shares in Apple supplier AMS AG were collapsing, falling 26.33% after the 2017 stock market darling and manufacturer of optical sensors for cell phones said warned of weaker fourth quarter margins.
French IT giant Atos was another standout faller after investors recoiled in the wake of the company's latest guidance.
Renault shares also traded on the back foot throughout most of the day, but managed to recover from their intra-session lows, after the auto-maker posted weaker than expected revenues for the three months to September on the back of lower sales in multiple emerging markets, including Turkey, Argentina and India.