European stocks sink on disappointing eurozone data

European equities tumbled on Tuesday as news of a sharp slowdown in eurozone business activity stoked fears over the timid economic recovery.

Among London's biggest fallers were drugmakers Shire and AstraZeneca -- both targeted by US takeovers this year -- as Washington acted to curb so-called tax-inversion deals that sap government income.

Elsewhere, shoemaker to the stars Jimmy Choo unveiled plans for a London stock market float valuing it at up to £800 million ($1.3 billion, 1.0 billion euros) to fund expansion in Asia.

The British capital's benchmark FTSE 100 index sank 1.44 percent to end the day at 6,676.08 points.

Frankfurt's DAX 30 index dropped 1.58 percent to 9,595.03, and the Paris CAC 40 fell 1.87 percent to 4,359.35 points, compared with Monday's closing level.

The slump came after a key survey showed business activity in the 18-nation eurozone slowed further in September, adding to concerns that a sluggish economic recovery could be close to stalling.

"We needed a reason for a decline (in the European markets) and we found it this morning with these indicators," said Guillaume Garabedian, management consultant with Meeschaert Gestion Privee.

Markit Economics said its Composite Purchasing Managers Output Index (PMI) fell for a second consecutive month, hitting a nine-month low of 52.3 points in September from 52.5 points in August.

The news offset the impact of better-than-expected Chinese manufacturing PMI data.

"The latest PMI data are testimony to the lacklustre nature of the eurozone's economic recovery," added ING analyst Martin van Vliet.

- 'Lacklustre' recovery -

Wall Street was dragged lower by Europe's fall and new US rules to stifle tax inversions, which raised questions about tens of billions of dollars worth of mergers that had initially excited the markets.

In mid-afternoon trade, the Dow Jones Industrial Average was down 0.44 percent to 17,096.46 points.

The broad-based S&P 500 slipped 0.37 percent to 1,986.88, while the tech-rich Nasdaq Composite Index slipped 0.20 percent to 4,518.62.

Back in London, Shire and AstraZeneca saw their share prices plunge after the US Treasury took action to halt a rising torrent of US companies moving offshore to cut their tax bills.

In July, Shire had accepted a £32-billion takeover bid from US peer AbbVie.

And in May, AstraZeneca successfully fought off a $117-billion takeover bid from US giant Pfizer.

Both blockbuster takeovers had proposed to switch their tax base away from the United States to minimise their liabilities.

At the close, AstraZeneca shares had dived 3.57 percent to 4,414.00 pence and Shire dropped 2.49 percent to 5,100.00 pence.

Troubled supermarket giant Tesco again saw its shares sink on Tuesday, closing down 4.19 percent to 194.50 pence as industry data showed the group losing valuable market share in home market Britain.

"We're seeing something of a perfect storm forming," said Tony Cross, market analyst at Trustnet Direct.

"That Tesco accounting issue has sparked concerns right across the sector, whilst the US clampdown on overseas acquisitions to facilitate so-called tax inversion schemes has hit the pharmaceuticals sector hard."

Barclays meanwhile fell 1.04 percent to 229.25 pence after the British bank was fined almost £38 million for putting client assets at risk, dealing a further blow to the troubled lender.

In London currency trade, the euro held firm despite the eurozone data at $1.2864, up from $1.2849 late in New York on Monday, when it had hit a 14-month low of $1.2813.

The single currency was stable against the British pound at 78.56 pence, while the pound rose slightly to $1.6368 from $1.6361.

The price of gold climbed to $1,222 per ounce, up from $1,213.50 on Monday on the London Bullion Market.

Asia's markets were mixed Tuesday after a gauge of Chinese manufacturing beat expectations to show a pick-up in September.

Shanghai jumped 0.87 percent to 2,309.72 points and Sydney closed up 0.98 percent at 5,415.7. But Hong Kong closed down 0.49 percent at 23,837.07 points, while Seoul fell 0.51 percent to 2,028.91.

Tokyo was closed for a public holiday.