Europe close: Stocks reel amid growth fears

European stocks were sharply lower on Wednesday, as investors digested weak manufacturing data from both sides of the Atlantic and slashed expectations for German GDP growth.

By the end of trading, the Stoxx 600 was 2.70% lower at 377.52, as Germany's DAX fell by 2.76% to 11,925.25 and the French CAC 40 dropped 3.12% to 5,422.77. Meanwhile, London's FTSE 100 was down 3.23% at 7,122.54.

Investor concerns over a global slowdown were heightened after the Institute for Supply Management’s US factory activity index published on Tuesday declined to 47.8 for September from 49.1 the month before, missing an expected increase to 50.1 and reaching its lowest level in more than a decade.

This came after the IHS/Markit final Eurozone September manufacturing purchasing managers’ index slipped to 45.7 from 47.0 in August, just ahead of estimates, but still at its lowest level since October 2012.

Michael Hewson, market analyst at CMC Markets UK, said: "Declines now appear to be accelerating on rising concern that the ongoing deterioration in the manufacturing numbers will at some point start to manifest itself in the much larger services sector."

"We will find out more later this week with the release of the services numbers, however the longer the weakness in manufacturing goes on the more likely this weakness will be seen in services."

Against that backdrop, come Wednesday, Germany's leading economic institutes cut estimates for 2019 full year GDP growth from the 0.8% predicted in the spring to 0.5% in a collaborative report released on Wednesday.

The Ifo Institute’s joint economic forecast also slashed next year's expected growth from 1.8% to 1.1% due to political uncertainty and reduced worldwide demand for capital goods.

In the UK, Prime Minister Boris Johnson is set to unveil his "final" Brexit negotiation offer in an address at the Conservative Party conference during the day. Markets.com analyst Neil Wilson said he believed the offer would fall short of EU requirements and be rejected.

"Boris knows this - the only narrative that matters is the one that shows the will of the people being frustrated by recalcitrant MPs and perfidious foreigners. The PM will ‘sell’ this pup to the Tory faithful in his conference speech but it’s all optics," he said.

Among individual stocks, Flutter Entertainment, formerly Paddy Power, was the top riser on the Stoxx 600 after it agreed an all-share merger with Nasdaq and Toronto-listed Stars Group, a provider of technology-based product offerings in the global gaming industries.

Grenke also racked up strong gains after the German leasing company raised its forecast for new business following a strong third quarter.

Pernod Ricard slipped even after analysts at Jefferies upgraded the French spirits maker to 'buy'.