Europe close: Carmakers' shares pummeled amid growth, US tariff concerns

Stocks across the Channel reeled after the European Union's executive arm slashed its near-term forecasts for economic growth across the bloc and after reports broke that a sizeable distance remained between the US and China in trade talks, with the Auto&Parts sector singled out by traders for an especially punishing session, possibly amid concerns of fresh US tariffs.

In its Winter Forecasts, the European Commission cut its projection for euro area-wide growth in 2019 from 1.9% to 1.3%.

Although for 2020 it saw the pace of expansion bouncing back to 1.6%, the markdowns to projections for growth in Italy and Germany in 2019 were quite significant, with that for the former going from 1.2% to just 0.2% and for the latter from 1.8% to 1.1%.

And as the Commission itself pointed out: "Risks remain substantial and mainly stem from potential policy mistakes across the globe."

Commenting on the market backdrop, CMC Markets UK's David Madden said: "European stock markets are sharply lower this afternoon as the European Commission and the Bank of England cut growth forecasts. Eurozone stocks are suffering greatly as investors are fearful the region could be in for an economic downturn.

"Brexit is on the horizon and the situation is still very unclear about what the future relationship will look like beyond the 29 March. The EU also have a lot to lose should the UK leave without a deal, and the deteriorating economic condition could not come at a worse time."

By the end of trading, the benchmark Stoxx 600 was down by 1.49% or 5.44 points at 360.08, alongside a drop of 2.67% or 302.70 points to 11,022.02 for the German Dax and a 1.84% or 93.49 point fall on the Cac-40 to 4,985.56.

Adding to the selling pressure, broadcaster CNBC cited US national economic council advisor, Larry Kudlow, as saying that a "sizeable distance" remained between the US and China's negotiating positions.

There was also some 'market chatter' to be heard around the risk of US tariffs being levied on European car exports over the coming weeks or months.

A 25% levy - as threatened by the White House - would cut euro area GDP growth by between three and four tenths of a percentage point and lop six tenths of a point off of Germany's, analysts at Barclays Research estimated.

Against that backdrop, the Stoxx 600's Auto&Parts sub-index dropped by 4.88% to 471.76 points.

Fiat shares performed particularly poorly, shedding 12.20% in a single swipe, although earlier in the day the carmaker had surprised analysts with a weaker-than-expected set of results in North America.

Germany's Wirecard was also pummeled following two reports - denied as false by management - that two senior executives were aware of allegations of accounting fraud.

Elsewhere on the economic front, Germany's Federal Office of Statistics reported that industrial output in the Eurozone's largest economy shrank at a clip of 0.4% month-on-month (consensus: 0.8%), although past data was revised higher by a combined 0.6 percentage points.

Similarly, over in Spain, the national statistics office said that in December industrial output dropped by 1.4% on the month, led by declines in consumer goods durable of 5.0% and of 2.5% in capital goods

Meanwhile, in France, the seasonally adjusted trade deficit for December printed at -€4.65bn, which was down from a reading of -€4.8bn for the previous month (consensus:-€4.0bn).