Investing.com - European stocks plunged lower into the close Tuesday, as market sentiment turned sharply bearish after Moody's lowered its credit ratings on five Spanish regions.
At the close of European trade, the EURO STOXX 50 plunged 2.10%, France’s CAC 40 plummeted 2.40%, while Germany’s DAX 30 was smacked lower by 2.11%.
Market sentiment weakened broadly after ratings agency Moody’s cut the credit ratings of Catalonia and four other Spanish regions late Monday, citing their worsening liquidity positions and predicting that these regions are likely to ask the central government for aid in 2013.
The downgrade comes on the heels of regional elections in Spain. Prime Minister Mariano Rajoy’s center-right Popular Party increased its majority in his home region of Galicia on Sunday, removing a possible obstacle to formally requesting financial aid from Spain’s euro zone partners.
Rajoy said last week he still had not decided whether to request a sovereign bailout.
In earnings news, Alfa Laval plummeted 5.57% after order intake missed some analyst estimates, while D.E Master Blenders lost 3.91% after it posted first-quarter revenue that missed analyst estimates as price increases in Germany led consumers to reduce purchases.
Meanwhile, financial stocks pushed lower, as French lenders BNP Paribas and Societe Generale plunged 1.20% and 2.08%, while Germany's Deutsche Bank and Commerzbank dove 2.77% and 2.24% respectively.
Reuters reported earlier that Commerzbank is looking to sell off its custodian business that protects its clients' financial assets and that it has asked UBS to help it sell the custody business.
Peripheral lenders also posted sharp losses, with Italian banks Unicredit and Intesa Sanpaolo both retreating 1.53%, while Spain's BBVA and Banco Santander slumped 1.88% and 0.86%.
In London, commodity-heavy FTSE 100 gave back 1.44%, weighed by losses in energy stocks, while data showed that mortgage approvals in the U.K. rose more-than-expected in September.
Mining giants Rio Tinto and BHP Billiton extended earlier losses, as shares retreated 2.75% and 2.24% respectively, while copper producers Xstrata and Kazakhmys plunged 2.01% and 4.43%.
Oil and gas major Anglo American added to losses, with shares plunging 2.49%, while rival BP slid 1.43%.
U.K. lenders also remained broadly lower, as shares in HSBC Holdings dropped 0.92% and Barclays tumbled 1.02%, while Lloyds Banking plummeted 1.92% and the Royal Bank of Scotland dove 2.06%
Elsewhere, Mulberry saw shares sink 23.86% after the luxury brand issued a profit warning, blaming sales and wholesale revenue.
In the U.S., equity markets followed lower with the Dow Jones falling 1.72%, the S&P 500 dropping 1.57% and the Nasdaq giving back 0.89%
Investors are awaiting the U.S new home sales numbers and the interest rate decision on Wednesday.