European stocks slide as deflation fears persist

Europe's leading stock markets fell sharply in early trading on Wednesday as deflation worries sweep across the region, while tumbling commodity prices sent mining and oil share prices crashing.
In morning deals, London's FTSE 100 index slumped 1.60 percent to 6,437.95 points compared with Tuesday's close, as shares in mining group collapsed after copper prices slumped to near six-year low points. Crude futures are also stuck around the lowest levels since 2009.
Frankfurt's DAX 30 meanwhile shed 0.82 percent to 9,859.33 points and the CAC 40 in Paris slid 1.0 percent in value to 4,247.11.
Meanwhile the rate of return on 10-year French government bonds fell to a record low level in the wake of weak inflation data and as expectations mount that the European Central Bank will unveil more stimulus at its policy meeting next week.
European Central Bank president Mario Draghi on Wednesday said it does not have many options left apart from sovereign bond purchases to ward off deflation in the euro area.
One possible problem for an ECB stimulus programme of a large-scale buying of government bonds known as quantitative easing or "QE" was removed on Wednesday.
A senior lawyer at the EU's top court found that a hugely controversial earlier bond-buying programme readied by the European Central Bank is legal.
Advocate General Cruz Villalon at the European Court of Justice said in an opinion that the programme was "in principle" in accordance with European treaties, after a legal challenge by German politicians and academics who charged the ECB was over-stepping its powers.
"The reason why this ruling was so important was because of the implications it could have had for QE (stimulus), which the ECB is expected to announce next week," said Craig Erlam, market analyst at Alpari trading group.
"Stock markets seem to be torn a bit at the moment between anticipation that the ECB will implement some form of QE as early as their next meeting on the 22nd January and increasing global growth concerns which explains the heightened intra-day volatility seen over the past few days," said Markus Huber, senior analyst at broke Peregrine & Black.
The World Bank cut Tuesday its global growth forecast for this year to 3.0 percent from 3.4 percent.
For developing countries which have been the biggest contributors to global growth in recent years, the World Bank cut its 2015 forecast by 0.6 percentage points to 4.8 percent.
"With little respite for investors amid deflation concerns and the World Bank lowering its outlook for the growth prospects of the global economy the volatility of late is set to continue," said Andy McLevey, head of dealing at stockbroker Interactive Investor.    
And Britain too faces the threat of negative inflation, dampening the prospect of the Bank of England raising its record-low interest rates this year.
The euro slid on the rising expectations that the ECB would pump more money into the economy, dropping to $1.1736 to from $1.177 late on Tuesday.