European markets slump to 26-month closing low

European markets slump to 26-month closing low

European shares slumped to a 26-month closing low on Thursday after a gloomy economic outlook from the U.S. Federal Reserve and weak data from China and Europe spooked investors.

The Fed said overnight, it now saw "significant" downside risks to the economy. Chinese manufacturing shrunk for the third straight month and the euro zone service sector posted a shock contraction.

While the sell off was widespread, with no gainers across the FTSEurofirst 300 , cyclical stocks seen most at risk in recession, were among the worst hit.

"Global growth worries today are even more prominent than the sovereign crisis; and that's not because sovereign crisis risk has diminished, it's because global growth worries have clearly increased," said Patrick Moonen, equity strategist at ING Investment Management.

By the close, the FTSEurofirst 300 index of leading blue-chip shares was down 4.7 percent at 875.30 points, wiping $270 billion off its market capitalisation, nearly half the size of the euro zone sovereign rescue fund. more