RTTNews - The European markets fell for the fifth day on Wednesday, led by banking and energy stocks, after the the International Monetary Fund said the world economy was stabilizing but recovery would be sluggish.

The IMF said it expects the world economy to shrink by 1.4% in 2009, slightly worse than its earlier estimate of 1.3%. However, the IMF boosted its estimate for global economic growth in 2010 to 2.5% from its April projection of 1.9%.

Economic activity in the euro area in the first three months of the year contracted by the most since records began in 1995 on plummeting investment and exports, a second estimate from Eurostat confirmed today.

GDP for the 16-nation bloc shrunk 2.5% in the first quarter from the fourth quarter. This marked the largest decline since 1995 and matched preliminary figures released on June 3.

Crude for August delivery fell $2.42 to $60.51 a barrel on the New York Mercantile exchange, by the time the European markets closed, after U.S. government data showed a bigger-than-expected rise in fuel stocks.

The FTSEurofirst 300 index of pan-European blue chips closed 1.12% lower at 817.12 points, while the narrower DJ Stoxx 50 index fell 0.88% to 2,022.80 points.

Around Europe, the U.K.'s FTSE 100 index slipped 1.12% to 4,140.23, while France's CAC 40 index dropped 1.27% to 3,009.71 and Germany's DAX index fell 0.56% to 4,572.65.

Economy sensitive banking stocks were among the worst losers. UBS, Switzerland's largest bank, slipped 3.4%, while BNP Paribas, France's biggest lender, fell 2.3% and Royal Bank of Scotland, Britain's second largest bank, dropped 4.5%.

Heavily weighted oil stocks edged lower after crude oil prices fell for the sixth day. BP, Europe's biggest oil company, slipped 0.9%, while Royal/Dutch Shell, the second biggest, and Total, the third biggest, both declined 0.8%.

Automotive stocks also lost ground on doubt about the pace of global economic recovery. Volkswagen, Europe's biggest carmaker, fell 1.4%, while Peugeot, the second biggest, slipped 5.1% and Renault, France's second biggest carmaker, dropped 7.5%.

Holcim, the world's second biggest cement maker, slid 4.5% after the company reiterated its prediction for a difficult 2009 as the economy shows no signs of reversal.

ArcelorMittal, the world's biggest steelmaker, sank 4.9% after the company said it is in advanced discussions with lenders to change the leverage covenant for its main banking facilities for a year. However, the company said it doesn't anticipate breaching its existing covenant.

On the other hand, Infineon, Europe's second biggest chipmaker, climbed 9.2% after the company agreed to sell its Wireline Communications business to an affiliate of Golden Gate Capital Corp. for ?250 million.

Aluminum producer Alcoa Inc. will kick off the second quarter U.S. earnings season later today as the first company in the Dow Jones Industrial Average to report financial results.

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