European shares dropped on Monday, hit by concern over the pace of global growth after data showed Japan, the world’s third-largest economy unexpectedly shrank by an annualized 1.6 percent in July-September.
Tokyo’s Nikkei index tumbled 3 percent, its biggest one-day slump since August, Reuters said in a report.
“It’s a bit of shock for the market because people believed that the Bank of Japan had everything under control. But overall the initial negative reaction shouldn’t last too long. Investors still expect central bank action worldwide to support the global economy,” FXCM analyst Nicolas Cheron said.
The news also shaved $1 off the price of Brent crude oil, as demand would fall if economies slide, and sent ripples across Europe, where the FTSEurofirst 300 pan-European share index was down 0.1 percent, having pared earlier losses.
The STOXX energy sector index has tumbled 20 percent since late June, tracking a slump in crude prices which has sparked speculation that big energy majors will suspend a number of projects and slash capital expenditure.
The FTSEurofirst 300 index of top European shares is up 1.8 percent so far in 2014, falling behind a 10 percent rally for Wall Street’s S&P 500 over the same period.
Other Asian shares also fell. MSCI’s main index of Asia-Pacific stocks outside Japan lost 0.7 percent.
Chinese equities dropped as profit taking outweighed buying by foreign investors as a landmark Hong Kong-Shanghai trading link debuted on Monday.
The Shanghai Composite ended down 0.2 percent and Hong Kong’s Hang Seng lost one percent.
The yen was the big mover on foreign exchange markets. After the GDP data, it fell to as low as 117.06 to the dollar but then rebounded and was last at 116.25, a shade higher on the day.
“People (in London) are doing a bit of position squaring after getting caught out by the scale of this surprise,” said Daragh Maher, a strategist at HSBC in London.
The euro was down 0.2 percent at $1.2499.
As the Japanese data stoked concerns about the global economy, undermining stronger-than-expected US retail sales data on Friday, German 10-year Bund yields edged down to 0.79 percent, just above a record low of 0.716 percent.
Brent crude last traded at $78.28 a barrel, down 1.4 percent after the Japanese data was seen hitting global demand and as Saudi Arabia reiterated the oil price should be left to supply and demand.
“This is a market where traders are looking for selling opportunities,” said Ole Hansen, senior commodity strategist at Saxo Bank.
Eyes remain on possible OPEC production cuts when the oil cartel meets next week.
