European stocks plunge on Italian debt woes; DAX drops 2.97%

Investing.com - European stock markets extended losses on Wednesday, after Italian borrowing costs surged to euro-era highs, adding to concerns over the country's financial woes and the handling of the region's debt crisis.

During European morning trade, the EURO STOXX 50 tumbled 2.59%, France’s CAC 40 dropped 2.26%, while Germany’s DAX 30 declined 2.97%.

Market sentiment was strongly hit after a Paris-based clearing house hiked the margin call on Italian bonds, sending the yield on Italian ten-year bonds to more than 7%, a level widely seen as unsustainable.

Investors were also jittery amid uncertainty over the ability of Italy’s new government to implement austerity measures and shore up the economy, after Prime Minister Silvio Berlusconi announced late Tuesday that he would step down next week.

Meanwhile, Greek officials were scrambling unsuccessfully to find a new prime minister to lead the future coalition government. 

The financial sector led losses, with Dutch lender ING Group plummeting 8.82% and German Deutsche Bank sinking 4.91%, while France's Societe Generale and BNP Paribas tumbled 4.28% and 4.21% respectively.

Italian lenders were also broadly lower as shares in Unicredit dove 5.94% and Intesa Sanpaolo dropped 4.17%. Meanwhile, Mediaset, the broadcast controlled by Silvio Berlusconi saw shares plummet 10.13% after the premier offered to resign.

In earnings, shares in French oil company CGGVeritas added 1.65% after reporting third-quarter net income of USD41 million and said it remains "confident" of achieving its full-year objectives. 

In London, FTSE 100 declined 1.90%, as U.K. lenders tracked their European counterparts sharply lower.

HSBC Holdings was one of the day's top losers, with shares diving 6.02% after the bank said third-quarter underlying pretax profit dropped to USD2.96 billion from USD4.6 billion following lower revenue in the global banking and markets division.

Meanwhile, Barclays saw shares plummet 5.23%, while the Royal Bank of Scotland and Lloyds Banking tumbled 4.84% and 4.08% respectively.

Elsewhere, shares in Admiral Group plunged 28.83% after the insurance group warned that full-year profit will be at the lower end of analyst estimates if there is no reversal in the fourth quarter.

In the energy sector, stocks remained mixed as mining giants Rio Tinto and Bhp Billiton declined 2.28% and 2.85%, while International Power saw shares advance 0.33%.

Elsewhere, U.S. equity markets pointed to a sharply lower open. The Dow Jones Industrial Average futures pointed to a drop of 1.71%, S&P 500 futures signaled a 2.21% fall, while the Nasdaq 100 futures indicated a 1.86% decline.

Earlier Wednesday, government data showed that China’s annualized rate of consumer price inflation came in broadly in line with expectations in October, slowing to 5.5%, after a 6.1% the previous month, easing fears over monetary tightening by Beijing.