European shares stage broad selloff

London - European shares staged a broad-based selloff on Tuesday as weak German industrial output data darkened the outlook for the region's largest economy.

All but one sectoral index in the pan-European STOXX Europe 600 fell. The basic resources index was the only exception, rising 1% as news of a rejected merger approach by Glencore for larger rival Rio Tinto rekindled speculation about consolidation in the mining industry.

At 12:32, the FTSEurofirst 300 index of top European shares was down 0.9% at 1 338.17 points, giving up most of a 1.1% rise over the previous two sessions.

Frankfurt's DAX fell 0.8% after data showed the biggest drop in Germany's industrial production since the financial crisis in early 2009.

The report, which came hard on the heels of disappointing German industrial orders on Monday, raised question marks about a country that investors expected to be Europe's growth engine, and piled further pressure on the European Central Bank to do more to stimulate the region's economy.

The ECB cut its interest rate to a record low and unveiled plans to buy reparcelled debt and covered bonds last month.

"Considering the relative size of the industrial sector in Germany, it increases the odds that Germany will either be growing at zero or slightly negative in the fourth quarter," said Wouter Sturkenboom, investment strategist at Russell Investments.

"At the moment we have maintained a small array of eurozone equities and we are holding on to that. Unless things deteriorate from here we would keep that because we think that the stimulatory ECB policy is going to allow the eurozone to maintain its trend growth."

Germany's DAX has been lagging all other major European markets so far this year, down 4.4%.

Also weighing on the DAX was Deutsche Lufthansa after German pilots union VC on Monday called a strike in a dispute over retirement benefits. The airline's stock was down 3.4% at 12:55.

Miners

Bucking the market's declines, miner Rio Tinto surged 4.7% after it said it had rejected a merger approach from smaller rival Glencore that would create a $160bn mining and trading giant.\

READ: Rio Tinto rejects Glencore merger approach

The news sparked hopes of consolidation in the basic resources sector, recently hurt by a slump in metal prices including iron ore, which has hit five-year lows.

The STOXX basic resources sector index has lost 12% since late in July.

Shares in Anglo American [JSE:AGL] added 2.2% while Glencore [JSE:GLN] fell 1.6%.

Shares in Cairn Energy, meanwhile, surged 8.1% after the oil explorer said it had discovered oil at a well in a previously untapped area off the coast of Senegal.