VIENNA (dpa-AFX) - European stocks were battered for a second day in a row on Tuesday, as Greek Prime Minister George Papandreou stunned the markets by calling for a referendum on Greece's participation in a sovereign debt rescue fund.
Opinion polls suggest that majority of Greeks oppose the conditions set by the international lenders. If the public sentiment reflects also in the referendum, which would possibly take place early next year, it will impact the country's finances.
The Euro Stoxx 50 index of euro zone blue chippers was down 5.31 percent at last check, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 2.99 percent.
Unofficially around Europe, the German DAX declined 5.03 percent, France's CAC 40 fell 5.38 percent, the U.K.'s FTSE 100 gave back 2.37 percent and Switzerland's SMI was down 2.49 percent.
German Chancellor Angela Merkel and French Prime Minister Nicolas Sarkozy are meeting with Papandreaou and representatives from the International Monetary Fund tomorrow in Cannes.
Reports indicated that the Greek referendum may not take place because Papandreou's government may fall.
Banks were crushed due to concerns about exposure to government debt, with the Stoxx Europe 600 Banks Index plunging 6.58 percent.
With the spreads between Italian and German bonds widening, Société Générale tumbled 16 percent and BNP Paribas lost 13 percent.
Shares of Credit Suisse fell 9 percent after the Swiss banking major said it would cut 1500 jobs globally as part of its aggressive cost-cutting. Third-quarter net income rose 12 percent to 683 million Swiss francs.
Barclays Plc dropped around 10 percent after UBS AG downgraded the bank to 'neutral' from 'buy.'
Daimler was downgrded at Barclays, and shares of the German automaker dropped 5.7 percent.
Pharmaceutical giant Pfizer, Inc. reported Tuesday a profit for the third quarter that soared from last year, boosted by a hefty gain on the sale of Capsugel unit. European drugmakers struggled on Tuesday, with Novartis down 0.8 percent.
Shares of mining giant BHP Billiton eased 2.8 percent in London, after weak Chinese manufacturing data renewed concerns about a slowdown in the world's second-largest economy.
The U.K. economy expanded at a faster than expected pace in the third quarter, underpinned by an improvement in services and a recovery in production that offset a decline in construction.
Gross domestic product increased 0.5 percent quarter-on-quarter, much faster than the 0.1 percent growth logged in the previous quarter, preliminary estimates from the Office for National Statistics revealed Tuesday.
Activity in the U.S. manufacturing sector unexpectedly expanded at a slower rate in the month of October, according to a report released by the Institute for Supply Management on Tuesday, with the index of activity in the sector pulling back toward the key 50 level.
The ISM said its manufacturing index dropped to 50.8 in October from 51.6 in September, with a reading above 50 indicating growth in the sector. The drop surprised economists, who had expected the index to edge up to 52.0.
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© 2011 AFX News
