European stocks tumble as markets eye summit; DAX down 1.38%

Investing.com - European stock markets were sharply lower on Wednesday, as investor confidence weakened amid uncertainty over the outcome of a highly anticipated meeting of European leaders later in the day.

During European morning trade, the EURO STOXX 50 plunged 1.55%, France’s CAC 40 tumbled 1.33%, while Germany’s DAX 30 dropped 1.38%.

Sentiment came under pressure earlier, after former Greek Prime Minister Lucas Papademos said late Tuesday that Greece had no choice but to stick with a painful austerity program or face a damaging exit from the euro zone, a risk he said was unlikely to materialize but was real.

Meanwhile, investors eyed a key European Union summit later in the day, amid concerns over a divide between France's new President Francois Hollande, who favors measures designed to support growth and pro-austerity Germany.

President Hollande was expected to propose the introduction of joint euro bonds at the summit, but Germany has repeatedly resisted the idea, arguing they would lessen pressure for heavily indebted countries to get their finances in order.

Financial stocks were broadly lower, led by Dutch lender ING Group, down 2.32%, and closely followed by Germany’s Deutsche Bank and Commerzbank, with shares plummeting 1.99% and 1.24% respectively.

France’s biggest lenders BNP Paribas and Societe Generale were also sharply lower, as shares retreated 1.77% and 1.62%.

Meanwhile, German software company, SAP slipped 0.17% after agreeng to buy Ariba, an online trading platform for businesses, for USD4.3 billion.

On the upside, France-based Carrefour, the world’s second-largest retailer, surged 4.81% after the stock was raised to outperform, the equivalent of buy, from underperform at Credit Suisse Group AG and added to the firm’s focus list.

In London, commodity-heavy FTSE 100 retreated 1.24%, weighed by sharp losses in mining stocks.

Shares in Rio Tinto dove 3.72%, after Australia's Queensland state approved earlier the almost USD1.5 billion expansion of the company’s bauxite mining operations, leaving the project in the hands of the federal government, which has raised concerns about shipping through the Great Barrier Reef.

Rival Bhp Billiton saw shares plummet 3.31%, while copper producers Xstrata and Kazakhmys tumbled 3.66% and 3.46% respectively.

Financial stocks also added to losses as shares in Lloyds Banking dropped 1.76% and HSBC Holdings retreated 1.53%, while the Royal Bank of Scotland and Barclays declined 1.18% and 1.12%.

Elsewhere, Burberry shares plunged 4.76% as the company reported adjusted pretax profit of GBP376.2 million in the 12 months ended March 31.

On the upside, Cove Energy Plc surged 10.27% after the U.K. agreed to be acquired by PTT Exploration & Production Pcl after the Thai producer raised its offer to GBP1.22 billion, beating out Royal Dutch Shell Plc.

In the U.S., equity markets pointed to a lower open. The Dow Jones Industrial Average futures pointed to fall of 0.38%, S&P 500 futures signaled a 0.34% loss, while the Nasdaq 100 futures indicated a 0.28% decline.

Later in the day, the U.S. was to publish official data on new home sales.