European equities extended losses on Thursday, echoing a sharp decline overnight on Wall Street, as the rising threat to global growth from the U.S. and Europe prompted investors to reduce their exposure to risky assets.
By 0704 GMT, the FTSEurofirst 300 was down 6.42 points, or 0.6 percent at 1,082.01, having fallen 1 percent on Wednesday, while the euro zone blue chip index fell 0.6 percent to 2,457.77.
Equities fell as U.S. politicians readied themselves for a tough battle over the 'fiscal cliff' of some $600 billion in automatic tax hikes and spending cuts, and ahead of data which is expected to show the euro zone slipped back into recession.
The global economy faces some severe headwinds. Against that backdrop we see short-term de-risking of portfolios, Abi Oladimeji, head of investment strategy at Thomas Miller Investment, said.
He said the pressures being placed on the global economy in particular from the euro zone and United States, combined with overly bullish investor sentiment in the summer and volatility – a crude gauge of investor fear – recently being at multi- year lows made a pretty convincing case for reducing allocations in equities.
With investors seeking safer havens against the backdrop of economic uncertainty, riskier basic resource stocks – demand for which is acutely tied to the performance of the broader economy – were early big fallers, down 1.1 percent.