(MENAFN- AFP) European stock markets fell on Tuesday as solid US data sparked renewed talk that the Federal Reserve could soon start tapering its vast economic stimulus, dealers said.
Growing speculation over Fed tapering also pushed the dollar higher, weighing on dollar-denominated metals and pushing gold to a five-month low.
"Continuing to drive sentiment ... has been growing fears that the Fed will scale back its asset purchases when it meets in a couple of weeks," said analyst Craig Erlam at trading firm Alpari.
"Until recently, this had looked unlikely due to the unknown impacts of the US government shutdown on the economy and the mixed data seen in the months leading up to it, but now it looks well and truly back on the table."
In late morning deals, London's benchmark FTSE 100 index slid 0.81 percent to 6,541.31 points, Frankfurt's DAX 30 shed 1.04 percent to 9,307.25 points and in Paris the CAC 40 reversed 1.69 percent to 4,213.33 compared with Monday's closing levels.
Madrid's IBEX 35 meanwhile dropped 0.91 percent to 9,657.30 points.
Europe's major markets had mostly fallen on Monday, making a downbeat start to the week on news of shrinking manufacturing activity in France and Spain.
In Paris, the telecom sector was a focus after Free said that it would include fourth generation (4G) Internet connection in its low-cost service package.
Free has put the French mobile telecom market in turmoil with a cut-price package, and competitors had hoped to re-build margins with 4G service prices. Shares in Orange fell by 3.46 percent to 9.19 euros, in Bouygues by 1.71 percent to 27.23 euros and in Vivendi which owns SFR by 1.58 percent to 18.33 euros.
Asian equity markets mainly fell on Tuesday following Wall Street's overnight losses as a better-than-expected US manufacturing report heightened speculation that the Fed will begin winding down its stimulus this month.
Hong Kong stocks dipped 0.53 percent, Seoul fell 1.05 percent and Sydney lost 0.44 percent, while Shanghai added 0.69 percent and Tokyo rose 0.60 percent.
In the United States, the Institute for Supply Management said Monday that factory activity grew at a much faster rate in November than in October.
The institute said its purchasing managers' index rose to 57.3 last month from 56.4 in October, despite expectations of a slight fall. The index is up 7.1 points since the beginning of the year.
A figure above 50 indicates growth while anything below points to contraction.
The news raised the prospect the Fed will start to cut back its $85 billion a month bond-buying programme this month as the economy shows signs of improving, dealers said.
In foreign exchange activity on Tuesday, the euro firmed to $1.3571 from $1.3539 late in New York on Monday.
The dollar meanwhile hit 103.38 yen -- the highest level since May. It later stood at 102.69 yen, down from 102.94.
The euro edged down to 82.69 pence against the British pound, which was firmer at $1.6410.
On the London Bullion Market, gold prices hit $1,217.84 per ounce -- the lowest level since early July -- as dealers took their cue from the strong greenback that makes dollar-denominated assets more expensive for buyers with cheaper currencies.
Gold later stood at $1,223.22, down from $1,229.50 on Monday.
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