Europe close: Stocks slide as hopes for more stimulus fade

European equities markets lost ground on Tuesday, falling into the red as expectations of further stimulus were dampened by a bank lending survey from the European Central Bank showing improved lending conditions.

The benchmark Stoxx Europe 600 index closed down 0.43%, while France’s CAC 40 was 0.64% lower and Germany’s DAX fell 0.16%.

As of 1632 BST, the euro was on the front foot against the main currencies, gaining 0.12% and 0.16% against the dollar and the pound and rising 0.43% against the yen, while Brent crude climbed 0.21% to $48.71 a barrel.

Credit standards ease in third quarter

Regional indices headed south after the latest ECB bank lending survey revealed that credit standards for Eurozone companies eased more than expected in the third quarter as banks made use of the central bank’s asset-purchase programme to grants loans.

The survey found that banks lowered their credit standards in the third quarter as they became increasingly competitive, and the net percentage of banks reporting an easing of credit standards on loans to firms in the third quarter was -4% from -3% in the second quarter.

“The APP had a net easing impact on credit standards and particularly on credit terms and conditions. The easing impact was greatest for loans to enterprises,” the ECB said.

Although good news in itself, market participants interpreted it as meaning that the ECB would see no need for further stimulus.

An ECB meeting takes place in Malta on Thursday and many investors had been hoping for fresh stimulus measures to be announced.

“Thursday’s ECB get-together is likely to be much talk but little action, in common with most of these meetings, but there is still a growing sense that something must be done to enliven a flagging eurozone economy,” said IG’s senior market analyst Chris Beauchamp.

On the economic data front, according to data published by Destatis, Germany's producer prices fell 0.4% month-on-month in September compared with a 0.5% decline in the previous month and with analysts’ expectations for a 0.2% decline.

On a year-on-year basis, producer prices fell 2.1% compared with a 1.7% decline in August, while economists expected a 1.8% decline.

Fresh woes for Volkswagen

In company news, Swedish phone carrier TeliaSonera gained 0.94% after downgrading its full-year earnings forecasts and reporting a drop in profit, as the results weren’t as bad as feared.

Swiss biotechnology company Actelion rallied 3.90% after it lifted its full-year earnings forecast and posted better-than-expected sales of its new drug to treat pulmonary arterial hypertension.

On the downside, German car maker Volkswagen slipped 1.98% following reports it may face a fine of as much as €600m in Spain and executives in the country may get a jail term.