Europe close: Analysts, IMF call for bold action from policymakers

European stocks fell on Tuesday, with basic resources suffering the brunt of the downturn following disappointing data from China and as investors chose to focus on the negatives on Tuesday.

The benchmark DJ Stoxx Europe 600 index finished down by 1.01%, Germany’s DAX was off by another 0.88% and France’s CAC slid 0.86%.

Speaking in Washington DC, IMF deputy managing director David Lipton warned global authorities against the risks of inaction and called for structural reforms and fiscal stimulus from those countries which could afford it.

He quoted Winston Churchill's famous maxim, “I never worry about action, but only inaction.”

"This is one of those moments where action — concerted action — is needed," Lipton said.

Nomura downbeat on China

Shares in basic resource companies – which are highly dependent on Chinese demand – dropped sharply after data showed China’s trade performance last month was much worse than economists had been expecting, with exports and imports down more than forecast.

The DJ Stoxx 600 sector gauge plummeted 9.18% to 266.15 points, albeit after a near-50% rally from its mid-January lows.

Chinese exports fell 25.4% from the previous year to $126.1bn, compared with January’s 11.2% contraction. Imports, meanwhile, were down 13.8% to $93.5bn, compared with an 18.8% drop the previous month.

Most economists put the fall in exports down to negative-base effects, telling clients they expected an improvement over coming quarters.

Analysts at Nomura, on the other hand, stuck to their negative view for Asia's largest economy.

"Overall, today's trade data, together with high-frequency data and leading indicators, suggest that growth momentum weakened further in January-February," they said.

"We maintain our forecast of real GDP growth slowing to 5.8 percent in 2016 from 6.9 percent in 2015."

Oil prices also retreated after Kuwait said it would only agree to freeze output if all major producers take part. West Texas Intermediate crude oil futures fell 2.91% to $36.83 a barrel.

The Stoxx 600 sub-index for oil and gas on the other hand surrendered 2.5% to finish the day at 266.67.

Piling the pressure on the commodity space on Tuesday, Goldman Sachs said in a research note that the commodity rout was not over. “In the current supply-driven market, demand hasn’t really changed, it takes lower prices to push and keep supply below demand to create a deficit. As a result, higher prices are much harder to sustain in a supply-driven market since supply is primed to return with higher prices,” the bank said.

ECB must move decisively

Acting as a backdrop, speaking on Bloomberg TV the FT's Wolfgang Munchau repeated a call for the European Central Bank to announce on Thursday it would purchase bad loans from banks and to push for M&A in the sector. Those two moves would then pave the way for cuts in the ECB's deposit rate.

On the corporate front, Casino was in the red after US research firm Muddy Waters put out another scathing note on the French supermarket retailer.

Payment processor Worldpay, which listed on the London Stock Exchange last year, was under the cosh despite saying it swung to a pre-tax profit of £19.1m in 2015 compared with a £47.1m loss the previous year.

On the upside, shares in advertising agency WPP edged lower after it put out a brief update in response to demand from investors and analysts saying like-for-like revenue and net sales growth were both “well over 3%” in February.

Luxury goods brand Burberry was a high riser following a press report it was seeking help to fight off a takeover bid.

On the data front, Eurostat revealed the Eurozone economy grew in line with analysts’ expectations in the fourth quarter.

Gross domestic product was confirmed at 0.3% quarter-on-quarter growth in the last three months of 2015, unchanged from the previous estimate.

Compared with the same quarter a year earlier, seasonally adjusted GDP increased 1.6% in the euro-area, up slightly from an earlier estimate of 1.5% year-on-year growth. Analysts had expected no change.

Data released earlier by the Economy Ministry showed German industrial production rose the most in more than six years in January, underpinned by strong domestic demand.

Adjusted for seasonal swings, industrial production rose 3.3% from the previous month following a 0.3% drop in December, beating economists’ expectations of a 0.5% increase. On the year, industrial production was up 2.2%, also beating forecasts.