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European Markets Tumble On Growth Worries

European markets ended notably lower on Thursday after the European Union lowered its growth outlook for the Euro area for 2019 and 2020. A lower projection for the U.K. economy by the Bank of England and weak economic data from Germany weighed as well.

Due to broad based selling in European markets, the pan European Stoxx 600 declined as much as 1.36%. Among the major markets in Europe, Germany plunged sharply, with its benchmark DAX declining 2.52%. France's CAC 40 and the U.K.'s FTSE 100 ended lower by 1.6% and 1%, respectively. Switzerland's SMI shed 1.17%.

Among other markets in Europe, Italy ended nearly 2.5% down after the European Union slashed Italy growth forecast for 2019 to a five-year low or 0.2%. The EU had earlier predicted a growth of 1.2% for Italy.

Austria, Belgium, Finland, Greece, Netherlands, Poland, Portugal, Russia, Spain and Sweden lost 1 to 2%.

Norway, Czech Republic and Denmark ended modestly lower and Turkey edged up marginally.

Shares of tour operator TUI plunged more than 19% after the company cut its earnings outlook. WPP shed more than 8% and Capita ended lower by about 5.2%.

Mondi, Old Mutual, RBS, Babcock International, Provident Financial, Barclays and Sage were among the other prominent losers in the U.K. market.

In Germany, Wirecard ended more tha 14% down. Deutsche Bank, Thyssenkrupp, Daimler, Covestro, Volkswagen, Continental, HeidelbergCement, BASF, BMW and Bayer lost 4 to 6%.

In France, Publicis Groupe tumbled 14.5%. Valeo declined more than 7%. Societe Generale, Technip, ArcelorMittal, Atos, STMicroElectronics, Capgemini, Carrefour, Credit Agricole, Peugeot and BNP Paribas lost 2.5 to 7%.

The European Union slashed its GDP growth forecast for 2019 to 1.3% from 1.9% and lowered its estimate for growth in 2020 to 1.6% from 1.7%.

The downgrade reflected external factors, such as trade tensions and the slowdown in emerging markets, notably in China. Officials warned that the European outlook faces substantial risks due to the uncertainty about Brexit and the slowdown in China.

The EU has revised downward its forecast for the German economy to 1.1% for 2019, from a previous forecast of 1.8%.

Preliminary figures from the Federal Statistical Office showed that Germany's industrial production decreased by a calendar and seasonally-adjusted 0.4% in December, falling for a fourth consecutive month. In November, it decreased 1.3%, revised from 1.9%. Economists had expected a 0.8% increase in December.

The nine-member Monetary Policy Committee of the Bank of England left the bank's key interest rate unchanged at 0.75% and said that the slowdown in economic growth continued at the start of this year.

Meanwhile, on the Brexit front, the European Commission President Jean-Claude Juncker and British Prime Minister Theresa May have reportedly agreed to meed before the end of February. Over the next few days, officials from EU and the U.K. are scheduled to engage in a discussion over Irish backstop.

Markets were also tracking news on U.S.-China trade front. Despite positive comments from U.S. President Donald Trump and U.S. Treasury Secretary Steven Mnuchin that the two countries may reach a deal sometime soon, there are still doubts about a deal being struck before the expiry of the 90 day truce agreed to by the presidents of the two countries in early December 2018.

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