European stocks slide following US sell-off

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Many European markets were able to stay in positive territory into the afternoon, but once Wall Street opened moved down sharply.

London's FTSE 100 index of leading shares ended the day down 1.40 per cent at 5,881.37 points.

In Paris, the CAC 40 fell 1.41 per cent to 4,02.32 points while in Frankfurt the DAX slid 0.74 per cent to 7,102.80 points.

Elsewhere in Europe, Swiss stocks slid 0.52 per cent, Brussels shed 1.16 per cent, and Milan dropped 1.28 per cent. Lisbon bucked the trend, adding 0.06 per cent.

Madrid's IBEX 35 was even able to show a midday gain of over 0.40 per cent as traders said the Madrid market was winning support from Spain's biggest savings bank, La Caixa, which announced the evening before a complex deal to list its 9.48-billion-euro retail banking operations on the market.

The shares rocketed up 25 per cent at one point, and finished the day with a gain of 16.9 per cent at 5.2 euros.

The IBEX ended the day down 0.76 per cent.

There was more bad news for Spain's economy, which is fighting to regain the trust of financial markets and avoid being trapped in a debt quagmire that has engulfed Greece and Ireland and now menaces Portugal.

Official data showed jobless rate had surged to a 13-year record above 20 per cent at the end of 2010, the highest level in the industrialised world.

Markets had been awaiting the first official estimate of US gross domestic product (GDP) for the fourth quarter of last year, but in the end the impressive growth figures failed to boost the markets.

"The big focus for today is US GDP," said Simon Denham, head of trading firm Capital Spreads.

The US economy grew 2.9 per cent in 2010, its fastest clip in five years, the Commerce Department reported. But growth of 3.2 per cent in the fourth quarter missed economists expectations of 3.5 per cent.

Both the Dow Jones Industrial index and the broader S&P 500 jumped above key 12,000 and 1,300 benchmarks, respectively, just after opening but then quickly lost those gains.

Several disappointing earnings reports also dampened sentiment.

Ford Motor Co. shares fell 9.6 per cent in early trading after the company reported a huge drop in fourth quarter earnings to $190 million, from $886 million in the same period in 2009, with per share earnings almost 90 per cent off analysts' projections.

Ford explained the fall as the result of a major debt reduction push.

Key Nasdaq stock Amazon plunged 7.3 per cent at the opening on news that to powerful online marketer's sales margins had tightened unexpectedly int he fourth quarter.

At about 1700 GMT the Dow was down 1.0 per cent at 11,870.51 points.

The broader S&P 500 dropped 1.32 per cent to 1,282.45.

The tech-heavy Nasdaq fell 2.06 per cent to 2,6898.44.

On Friday, Tokyo led Asian stock markets lower, a day after Standard & Poor's cut Japan's credit rating over concerns about its huge debts and the government's lack of strategy to tackle the problem.

"Markets have started to show signs of nervousness again as this time sovereign debt concerns focus on Japan, one of the worst offenders when it comes to budget deficits where its public debt is double the size of economy," said Denham.

"Japan is heavily reliant on borrowing and has been for decades as its population continues to get older and its anaemic growth flat lines. The downgrade from S&P is a shot across the bows for what is now the third largest economy in the world after the US and China."