European shares sank by over one per cent today despite a recovery on Wall Street and across Asia, as investors positioned for sluggish growth in the euro area and ongoing monetary policy easing in the US and Japan.
However gold, which had touched its lowest level in more than two years yesterday, jumped over one percent to hit a high of $1,381.80 an ounce as the prospects for further monetary stimulus improved investor sentiment.
"Fund managers in Europe are switching guns because they are seeing on the one side Japan with positive momentum and Europe just getting deeper and deeper into a recessionary environment," Didier Duret, chief investment officer at ABN Amro.
The concerns have grown since the International Monetary Fund yesterday trimmed its growth forecast for the world economy for this year and next to reflect government spending cuts in the United States, monetary expansion in Japan and the latest struggles of recession-stricken Europe.
The pan-European FTSEurofirst extended a three-day losing streak to fall 0.75 per cent in early trade while London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX were as much as 1.5 per cent lower.
Earlier MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.4 per cent, rebounding from yesterday's selloff when it fell as much as 1 per cent and was close to its 2013 low.
US stocks had jumped more than 1 per cent yesterdayday. Gold, which has been leading a liquidation of assets across the board remained volatile despite its recovery and was last trading at $1,383.65, still up around 1 per cent. Crude oil futures also firmed, with Brent rising 0.15 per cent to $100.33 a barrel, after breaching below $100 for the first time in nine months yesterday.
"We still believe that the recent volatility in the commodity prices was mainly driven by long position liquidation, while the underlying backdrop remains risk-positive due to expanding global monetary easing," said Vassili Serebriakov, strategist at BNP Paribas.
