Europe close: Stocks nosedive as concerns grow over China slowdown

LONDON (ShareCast) - (ShareCast News) - European stocks fell sharply, with autos and basic resources pacing the decline as worries about a slowdown in the world's second-largest economy gathered pace after China's central bank further devalued the yuan. The benchmark Stoxx Europe 600 was down 2.69%, France's CAC 40 lost 3.40% weaker and Germany's DAX was down 3.27%.

Yuan tumbles The People's Bank of China (HKSE: 3988-OL.HK - news) cut its currency again, by another 1.6% following Tuesday's 1.9% devaluation. This was the biggest two-day lowering of the yuan against the dollar in more than two decades.

"Currency devaluation improves global competitiveness, but if what follows are further rounds of devaluations from competing economies, then a currency war may begin and this is rarely a force for good in the global economy," said Ben Gutteridge, divisional director at Brewin Dolphin (LSE: BRW.L - news) . "Under these circumstances prices come under continued pressure, profits contract, and a deflationary pulse is sent through the global system." Stocks under pressure from China Export stocks with exposure to China took a beating, with the Stoxx 600 basic resources index dropped 2.3% as investors worried about a slowdown in demand, which is a huge consumer of metals, while the corresponding index for autos and parts fell 1.8%, as China is the world's biggest car market.

Luxury goods companies such as Burberry and LVMH dropped 3.52% and 5.46% respectively and due to their exposure to China.

Shares (Berlin: DI6.BE - news) in Credit Suisse (Other OTC: CDSSF - news) fell 4.58% on reports the bank has entered settlement negotiations with the New York attorney general and the Securities and Exchange Commission over allegation of wrongdoing in private trading venues.

German consumer goods company Henkel (Other OTC: HELKF - news) slumped 8.82% The company posted a 14% rise in second-quarter sales and core profit, but organic sales, which account for half of total sales, slowed in the quarter.

Shares in German utility group E.ON slid 0.17% after it reported a drop in first-half profit.

Education and publishing company Pearson (Xetra: 858266 - news) lost 0.60% after saying it has agreed to sell its 50% stake in The Economist Group for £469m in cash. Wednesday data On a relatively quiet day in terms of economic data, a weaker-than-expected reading on Eurozone industrial production for June did nothing to lift the mood.

Official figures released on Wednesday showed industrial output in the area fell 0.4% compared with an upwardly revised 0.2% decline in May and expectations of a 0.1% drop.

Across the Atlantic (Shanghai: 600558.SS - news) , the number of job openings declined from 5.36m to 5.25m in June, while the number of hired rose to 5.18m from 5.06m.

The figure was below analysts' expectations for a 5.35m reading.

Elsewhere, the euro surged 1.5% against the dollar and 1.11% against the pound, while it climbed 0.51% against the yen.

Meanwhile, there was further trouble looming large for Greece , after a number of media sources, including AFP and German daily Bild, reported that the German government could strongly oppose the latest bailout deal.