European stocks drop on Fed speculation EUROPEAN stock markets have fallen with speculation growing that the US Federal Reserve will start scaling back its stimulus program. The mining sector was hit on Tuesday as newly-merged mining giant Glencore Xstrata revealed it plunged to a near $US9 billion ($A9.93 billion) first-half loss due to a write-down on the value of its assets. "It looks pretty ugly today; the mounting worries about Fed's policy direction weakened the appetite for high returns and caused the rush of money out of emerging markets triggering the sell-off in Asia," said Gekko Markets trader Anita Paluch. This in turned sparked the sell-off in Europe, adding to the worries. In late morning deals, London's FTSE 100 index of leading shares dropped 0.64 per cent to stand at 6,424.59 points. Frankfurt's DAX 30 dipped 1.05 per cent to 8,278.65 points and the CAC 40 in Paris shed 1.45 per cent to 4,024.78 compared with Monday's closing values. Asian equities mostly fell on Tuesday after another weak lead from Wall Street, with attention returning to the Fed's stimulus program as it prepares to release minutes of its latest meeting on Wednesday. Emerging markets took a beating on expectations the Fed's quantitative easing will start to dry up. Their currencies also suffered heavy selling, with the Indian rupee hitting another record low against the dollar. In Asia, Hong Kong stocks tumbled 2.20 per cent, Tokyo slumped 2.63 per cent and Shanghai was off 0.62 per cent. In company news, Europe's leading miners were slammed by news of a vast loss for Glencore Xstrata. The mining giant reported a switch into a first-half net loss of $US8.9 billion on Tuesday owing to merger write-downs. At the same time last year and on a comparable asset base, the business had made a net profit of $US2.2 billion. Publishing its first results since the merger, the new group took a charge of $US7.6 billion to write down goodwill, meaning intangible assets which have a lower book value than the market value when they changed hands. In reaction, London-listed Glencore Xstrata saw its share price slide 2.77 per cent to 293.6 pence. The Switzerland-based group said the write-down reflected the poor outlook for the mining industry and increased risks for big expansion projects and for the development of new sites. In more gloomy news, Anglo-Australian mining giant BHP Billiton on Tuesday said net profit slumped 29.5 per cent to $US10.88 billion in the year to June, citing slowing global growth and commodity price volatility. Shares in the world's biggest miner dipped 2.97 per cent to 1898 pence in London deals. Added to the negative backdrop, European steelmaker Arcelor Mittal was setback by a broker downgrade from Morgan Stanley. In foreign exchange trading, the European single currency stood at $1.3393 compared with $1.3334 late in New York on Monday. The dollar eased to 97.42 yen from 97.56 yen. And India's rupee hit a new all-time low against the dollar on continuing fears that recent measures to stabilise the currency and kickstart the flagging economy will not work. On the London Bullion Market, the price of gold increased to $1,365.75 an ounce from $1,365 on Monday.