By Sarah Turner
European shares fell Tuesday, with banks and metal stocks leading markets lower as investors digested some disappointing economic news.
The pan-European Dow Jones Stoxx 600 Index fell 1.8% to 231.82 on Tuesday. At the regional level, the German DAX lost 2.5% to 5327.29, the U.K.'s FTSE 100 Index fell 1.8% to 4819.70 and the French CAC-40 Index sank 1.9% to 3583.44.
Banks came under notable pressure in Europe, with shares of HSBC Holdings /zigman2/quotes/203901799/delayed UK:HSBA -1.86% falling 4.2% while BNP Paribas /zigman2/quotes/206351084/delayed FR:BNP -2.67% shed 3.8%. Miners were also weak. Shares of copper miner Vedanta Resources declined 5.3%.
Both the banking and mining sectors have rallied sharply from March lows, as investors held out hope that the global economy has now passed the turning point.
But there was some disappointing data for investors to face Tuesday, as the CIPS/Markit U.K. manufacturing purchasing managers index for August fell back below the 50 mark. Also, unemployment in the 16-nation euro zone crept to its highest levels in more than a decade.
"There are profits to be taken. The realization is just building that the scale and the duration of this recovery has been overestimated," said Philip Isherwood, strategist at Evolution Securities.
Commerzbank /zigman2/quotes/200193353/delayed DE:CBK -0.07% outperformed in the banking sector, its shares rising 3.6% after CEO Martin Blessing told the Financial Times Deutschland that the bank could turn a profit next year.
Among other stocks posting gains, Vivendi /zigman2/quotes/202179234/delayed FR:VIV +0.31% shares rose 1.1% after the company reported a 6.6% rise in second-quarter net profit and confirmed it still expects to post strong profit growth in 2009, despite the recession.
Havas rallied 11.9% in Paris after the advertising group reported better-than-expected results late Monday.
Health-care stocks were also firm, with AstraZeneca /zigman2/quotes/203048482/delayed UK:AZN -0.78% trading 0.6% higher. A study published recently in the New England Journal of Medicine found that AstraZeneca's blood-thinning pill works better than Plavix from Sanofi-Aventis /zigman2/quotes/206928357/delayed FR:SAN -0.66% and Bristol-Myers Squibb.
In Asia Tuesday, regional markets recovered Monday's steep losses as investors cheered the strong rise in the Chinese purchasing managers' index. Chinese PMI hit a 16-month high of 54.0 in August from 53.3 in July, above the boom/bust 50 mark for the sixth straight month, pushing Asian markets higher Monday.
Write to Sarah Turner at firstname.lastname@example.org