European stocks dropped to a one- year low, with the benchmark index posting its longest slump in 11 years, as concern grew that a financial crisis is returning to the region’s so-called peripheral nations.

The Stoxx Europe 600 Index retreated 1.3 percent to 307.29 at 3:21 p.m. in London, falling for an eighth day. The gauge earlier fell as much as 2.9 percent after Spain’s government fell short of its maximum target in a bond sale, adding to concerns the region’s recovery is faltering. Equity-benchmark indexes in Spain, Portugal and Italy slumped more than 2 percent each.

“We’ve reached the part of the cycle where bad news is bad news,” Steen Jakobsen, chief investment officer at Saxo Bank A/S in Copenhagen, said in a phone interview. “For years, we’ve been trading on monetary policy. Now we have to deal with real economic problems, and that of course, for the markets is a totally different kettle of fish.”

Volume changing hands in companies on the Stoxx 600 was more than double the 30-day average, according to data compiled by Bloomberg.

Concern is reaching a tipping point, with Europe is leading a rout that has wiped $5.5 trillion from the value of equities worldwide. While data from industrial production in Germany to retail sales in the U.S. has contributed to the gloom, sentiment began souring on Oct. 2, when European Central Bank President Mario Draghi stopped short of spelling out for how long the ECB might buy assets to head off deflation.

The Stoxx 600 has tumbled 8.8 percent since Oct. 6 as the International Monetary Fund cut its global-growth forecasts, and German industrial production and investor confidence declined.

‘Lower Expectations’

“There is a combination of concerns over the outlook for global growth and concerns on the outlook for inflation in the wake of a slew of negative data,” Jeremy Batstone-Carr, head of research at Charles Stanley & Co., said in a phone interview. “There is the likelihood that third-quarter corporate earnings expectations which have already been lowered may very well be lowered again over the fourth quarter given the poor macroeconomic backdrop.”

The yield on Spain’s 10-year bond jumped the most since June 2013 after the government raised 3.2 billion euros ($4.1 billion) in bond actions, below its maximum target of 3.5 billion euros. Greek bonds extended their drop to a fourth day. Yields on 10-year German bunds reached a record low today.

Italian Banks

In Italy, Prime Minister Matteo Renzi’s Cabinet passed tax cuts that raised doubts among economists whether they comply with the European Union rules. Italian lenders pushed a gauge of European banks to the worst performance among the industry groups on the Stoxx 600.

Banca Monte dei Paschi di Siena SpA and Banca Popolare di Milano Scarl slid 9.8 percent to 80.8 euro cents and 5.9 percent to 53.3 euro cents, respectively. Italy’s FTSE MIB Index lost 2.6 percent to this year’s low.

The European Union has started a two-week probe of euro- area governments’ draft budgets. As yields on 10-year securities from Europe’s most-indebted nations surged yesterday, led by Greece and sweeping up Portugal, Ireland and Italy, the European Commission started a process of picking apart nations’ 2015 spending plans, seeking to defuse potential fiscal time bombs.

National Indexes

National Benchmark indexes dropped in all the 18 markets in western Europe. Portugal’s PSI 20 Index slumped 3.3 percent to a two-year low, Spain’s IBEX 35 Index declined 2.2 percent to the lowest level this year.

A report today showed industrial production in the U.S. rose in September by the most since November 2012. The 1 percent advance in output at factories, mines and utilities exceeded the highest forecast in a Bloomberg survey and followed a 0.2 percent drop the prior month, the Federal Reserve reported today in Washington.

Nestle SA slipped 3.3 percent to 64.75 Swiss francs. The world’s biggest food company said nine-month sales excluding acquisitions increased 4.5 percent, missing the 4.7 percent gain expected by analysts.

Shire Plc, which yesterday plunged the most in 11 years, tumbled 9.8 percent today, after AbbVie Inc.’s board formally asked shareholders to vote against its takeover of the company.

Man Group advanced 3.8 percent to 112.4 pence. The world’s largest publicly traded hedge-fund manager said assets under management jumped 25 percent in the third quarter, in line with some analysts’ estimates, helped by acquisitions in the U.S.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at [email protected] To contact the editors responsible for this story: Cecile Vannucci at [email protected] Srinivasan Sivabalan