European shares in worst 1-day fall for 19 mths on Fed, China

LONDON, June 20 Thu Jun 20, 2013 11:34am EDT

LONDON, June 20 (Reuters) - European shares posted their steepest one-day fall in 19 months on Thursday, hit by the prospect of reduced U.S. monetary stimulus and fresh signs of sluggish Chinese economic growth.

The pan-European FTSEurofirst 300 index fell 2.9 percent to 1,146.22 points after the Federal Reserve said late on Wednesday stronger U.S. growth meant it would be likely to reduce its hefty asset purchases this year.

The Fed's quantitative easing programme (QE), along with similar moves from global central banks, have helped drive a 20 percent European equity rally in the past year in spite of a shrinking domestic economy and falling earnings expectations.

"The market has had its safety blanket taken away," Chris Wyllie, chief investment officer at wealth manager Iveagh, said.

Shares in financial services firms and banks , which are highly sensitive to trends in global markets and have been among top gainers in the past year, shed 3.6-3.7 percent as global bonds and shares fell.

Mining, auto and consumer goods stocks ended down between 3.5 percent and 4.2 percent as data showed factory activity in China, the world's top consumer of metals and a key client of European exporters of consumer goods, pointed to a sharper second quarter slowdown.