LONDON — European stock markets fell Tuesday after the International Monetary Fund cut its forecasts for global economic growth, while sentiment was also dogged by Spanish bailout speculation, dealers said.
In morning deals, London's benchmark FTSE 100 index of top companies slid 0.23 percent to 5,828.30 points, Frankfurt's DAX 30 shed 0.49 percent to 7,255.48 points and in Paris the CAC 40 lost 0.14 percent to 3,401.71.
Madrid's Ibex 35 index meanwhile declined by 0.11 percent to stand at 3,402.86 points, as rising Spanish bond yields also sparked renewed concern over a potential bailout.
In foreign exchange activity, the euro dipped to $1.2930 from $1.2968 late in New York on Monday.
Asian markets were mixed on Tuesday, with concerns over Europe's debt crisis overshadowing strong gains in Shanghai and Hong Kong fuelled by stimulus hopes.
"With the IMF announcing its second cut to global growth forecasts since April there is certainly a sombre tone to trading this morning," said Mike McCudden, head of derivatives at Interactive Investor.
He added: "Investors are bedding down for a long winter as they do not expect to see any signs of growth now until mid-2013.
"They are taking a risk-off approach in locking in some profits and looking for safe havens where they can be found."
European equities began Tuesday with slender gains on speculation over more Chinese stimulus measures, according to analysts. However, they hit reverse as investors digested the IMF's gloomy outlook and Spanish bailout fears.
The IMF cut its growth forecasts for the world economy on Tuesday, citing the impact of market turbulence and budget-cutting in developed countries, and warned that things could worsen if the eurozone crisis was not resolved.
The Fund slashed its 2012 global growth forecast to 3.3 percent, from its July estimate of 3.5 percent, with Asia still leading the pack of expanding regions while Europe contracts an expected 0.4 percent this year.
Global growth will only hit 3.6 percent next year -- lower than the 3.9 percent predicted in July -- as even powerful emerging economies like China, India and Brazil hit the brakes, the Fund said.
Turning to crisis-hit Spain, the IMF cut its 2012 forecast to a contraction of 1.5 percent, compared with minus 0.1 percent last time around.
And Spain's economy was expected to shrink 1.3 percent in 2013, which was deeper than the 0.7-percent contraction previously estimated.
The Spanish government had already forecast that the nation's economy would contract by 1.5 percent this year, but expects it to shrink by just 0.5 percent next year.
Madrid's downgrades have sparked fresh concern over the nation's perilous public finances at a crucial point.
The yield on Spanish 10-year bonds rose sharply Tuesday back above 6.0 percent for the first time in over a week after a meeting of eurozone finance ministers on Monday when there was no movement on a possible Spanish bailout.
The yield on 10-year Spanish government bonds rose to 6.095 percent on the secondary market, compared to 5.714 percent at Monday's close. It had been below 6.0 percent, a level considered by many economists to be unsustainable in the long term, since September 28.
"The IMF's (2013) downgrade to Spain -- below the official forecast -- has once again focused investors' minds on Spain's poor fiscal metrics, pressuring sovereign bonds and the euro," said RIA Capital Markets analyst Nick Stamenkovic.
"The markets are giving Spain the benefit of the doubt -- but if there is not an official request for external assistance before end-October then the market will push Spanish yields significantly higher," he told AFP.
The eurozone on Monday unlocked its 500-billion-euro ($650 billion) crisis war chest, the European Stability Mechanism (ESM) as Spain agonised over whether to seek a full bailout.
Spain's heavy debt refinancing burden and high borrowing costs are widely expected to force it to seek a bailout soon, with market pressure likely to rise on Madrid as it faces some 30 billion euros in repayments this month.
Madrid has held back on requesting a bailout as it wants more information on the terms it will need to meet to get help, while other eurozone states are divided on the issue.
Once a bailout is in place it would make Spain eligible for help from the European Central Bank, which announced a new government bond-buying programme designed to lower sovereign borrowing costs.
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