European markets fell Thursday as investor confidence was weighed down by the global economic concerns following the increasing trade deficit of Japan and China’s disappointing manufacturing activity.

 

The French CAC 40 index was down 1.01 percent or 35.81 points to 3496.01. Shares of Total SA dropped 1.19 percent and those of Renault SA fell 1.81 percent.

 

London's FTSE 100 index dropped 0.68 percent or 40.22 points to 5848.26. Shares of Rio Tinto Plc declined 2.32 percent and shares of Fresnillo PLC fell 2.25 percent.

 

The German DAX 30 index fell 0.92 percent or 68.01 points to 7322.75. Shares of Daimler AG        dropped 1.21 percent and those of Deutsche Bank AG declined 1.69 percent.

 

Spain's IBEX 35 was down 1.06 percent or 86.20 points to 8012.60. Shares of Telefonica fell 1.45 percent and those of Bankia SA dropped 1.16 percent.

 

Investor sentiment turned negative after the preliminary HSBC Flash Purchasing Managers Index (PMI) released Thursday showed that China's manufacturing activity continued to contract in September. The preliminary reading of the PMI, a measure of the nationwide manufacturing activity, rose to 47.8 in September compared to 47.6 in August. When the PMI is below 50.0, it indicates that the manufacturing economy is declining.

 

There have been fears of a hard landing after data showed in July that China's economy slowed down to 7.6 percent in the second quarter, down from 8.1 percent in the first quarter. Market players sense that China's investment-driven economic model, though successful for decades, is no longer seen as sustainable with the consensus being that the reforms will be needed to prevent a sudden downturn.

 

Also weighing down the market confidence was the report that Japan's trade deficit increased in August. Japan reported Thursday a rise in trade deficit in August compared to the previous month with a decrease in both exports and imports. The Finance Ministry data showed that the country recorded 754.1 billion yen ($9.62 billion) trade deficit in August, up from 517.4 billion yen deficit in July.