LONDON, June 6: Europe's main stock markets tumbled on Wednesday as dealers priced in an imminent increase in eurozone-wide borrowing costs. Frankfurt's DAX 30 index of leading shares slumped 1.33 per cent to 7,814.32 points, in Paris the CAC 40 dived 1.03 per cent to 6,015.79 and London's FTSE 100 lost 0.89 per cent to 6,573.90 points.The euro stood at 1.3519 dollars.
Wall Street fell on Tuesday from record high points struck a day earlier amid profit-taking and as US Federal Reserve chief Ben Bernanke said he expected American economic growth to improve in future months.
Japanese shares closed little changed Wednesday, pausing close to three-month highs.
Later on Wednesday, the European Central Bank (ECB) was widely forecast to raise eurozone interest rates by a quarter of a per centage point to 4.00 per cent. Market players were waiting for ECB chief Jean-Claude Trichet's press conference.
The market will focus on whether Trichet will signal further interest rate hikes -- after the one we are probably going to see today, said one Frankfurt-based trader who wanted to remain anonymous.
“Higher interest rates will, in the end, lead investors to take their profits from the equity markets and move to the bond market. We would see an immediate decline,” he added.
Rate decisions are closely watched by the stock market because rising rates also increase borrowing costs for businesses and reduces consumers' disposable incomes.
In Europe, metal companies fell heavily on profit-taking following recent strong gains.
In Frankfrut, German steelmaker Thyysenkrupp saw its shares plunge 2.89 per cent to 44.09 euros while global titan Arcelor Mittal plummeted 2.08 per cent to 46.18 euros in Paris.
Shares in French automaker Renault, meanwhile, drove 2.72 per cent lower to 110.3 euros, as investors also took profits after recent highs.
Meanwhile in London, it was expected that the FTSE will announce later Wednesday that Barratt Developments, Britain's biggest housebuilder, will replace banking group Bradford & Bingley in the FTSE 100 index.
In US deals on Tuesday, a better-than-expected monthly survey on service sector economic activity failed to give shares a lift amid a lack of big market-moving corporate takeover announcements.
The Dow Jones Industrial Average ended down a hefty 0.59 per cent to close at 13,595.46 points. The Nasdaq composite dropped 0.27 per cent to 2,611.23 and the Standard & Poor's 500 index shed 0.53 per cent to a close of 1,530.95.
Stocks also weakened after Fed chief Bernanke said the world's biggest economy was likely to improve to a “moderate” pace in future months following a pronounced slowdown at the start of the year.—AFP