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Paris - European shares sank on Wednesday, knocked down by worries over the pace of global growth fuelled by grim US retail sales data and as the World Bank cut its forecast for growth.
Shares in mining giants tumbled, with Glencore down 10.5% and hitting a record low, and Anglo American falling 9.6%, while copper prices tumbled 6% as investors slashed their exposure to the industrial metal. Copper mining represented nearly two-fifths of Glencore's operating profit in the first half of 2014 and about a quarter of Anglo's profit.
Major oil producers also retreated on Wednesday, tracking a recent sharp drop in oil prices. Royal Dutch Shell was down 2.4%, BP down 3% and Eni down 1.8%.
Even though lower commodity prices should help support the economy in the long term and lower input costs for companies in many sectors, investors worry that the benefits of cheaper oil and metals will be offset by anaemic economies and the threat of deflation.
"Inflation has basically disappeared in Europe, this is it. Prices are down in a lot of countries and salaries are going nowhere. There's a risk to see the drop in oil pushing the euro zone into deflation," said Daniel Larrouturou, deputy CEO of Paris-based Diamant Bleu Gestion.
"But we're not there yet, and a potential round of quantitative easing by the European Central Bank (ECB) could help avoid that."
Shares briefly trimmed losses around midday on Wednesday after an adviser to Europe's top court said an ECB bond-buying programme was legal under some conditions, potentially smoothing the way for a widely anticipated quantitative easing package for the euro zone.
At 15:22 GMT, the FTSEurofirst 300 index of top European shares was down 0.9% at 1 362.82 points. London's FTSE 100, home of a number of major commodity players, was down 2%.
The World Bank on Tuesday lowered its global growth forecast for both 2015 and 2016 due to disappointing economic prospects in the euro zone, Japan and some major emerging economies that offset the benefit of lower oil prices.
Adding to worries, data showed US retail sales recorded their largest decline in 11 months in December as demand fell almost across the board, denting expectations for a sharp acceleration in consumer spending in the fourth quarter.
"These growth fears are keeping markets busy and it is linked with the deflation question," said Christian Gattiker, chief strategist and head of research at Bank Julius Baer.
"We have the stress in financial markets because it's about the solvency and liquidity of oil producers."
The slump in crude oil prices started in mid-2014 has been pummelling the bonds of energy companies and sending shockwaves through the high-yield credit market.
