BRUSSELS, Belgium — THE fear that has gripped Europe’s sovereign debt market for months took root in its stock markets as investors increasingly worried yesterday about uncertain growth prospects for some of the continent’s biggest companies.

Spain and Italy watched their borrowing costs drop further in signs of success for a massive central bank move to quell Europe debt’s crisis, but stock markets were in turmoil as stronger economies showed worrying signs of slowing.

Germany’s stock market was down for the 10th consecutive day and new data from Europe’s growth engine showed that export growth — a closely watched economic indicator — is slowing down.

The Federal Statistical Office said exports in June were up by 3.1 per cent to euro88.3 billion (US$126 billion) on the year, the smallest increase in 16 months.

“In June, we got to feel the first indications of the decreasing global economic dynamism,” said Anton Boerner, the head of Germany’s exporters’ association.

The impact of the slowing US economy “will be felt in the coming months”, he added.

Germany has sailed through the debt crisis relatively unscathed. Despite much grumbling over the big contributions to the rescue packages to Greece, Ireland and Portugal, the eurozone’s largest economy enjoyed stellar growth last year and early this year, big companies like BMW and Volkswagen reported bumper profits and unemployment is lower than in has been in years.

But if the current stock market sell-off continues, this may soon change. Since July 22, the day after eurozone leaders decided to give their bailout fund new powers but refused to expand its size, Germany’s main stock index, the DAX has lost more than 20 per cent. That’s more than the 15 per cent drop seen on the FTSE 100 in the UK, or the 17 per cent dive on the French CAC-40.

Closely watched German indicators of consumer confidence and business confidence also declined more than expected last month.

German output grew by 3.6 per cent last year, and the government in Europe’s biggest economy hopes growth this year will again top three per cent.

But in France — Germany’s biggest trading partner — growth is likely to only be 0.2 per cent in the third quarter, the central bank said this week.

Though France remains one of Europe’s strongest economies, there have been some signs recently that the country may become the next triple-A country to be downgraded, especially as the government is unlikely to implement austerity measures ahead of spring elections at a time when the economy is slowing. One indicator of this possible concern has been the recent rise in the spread between German and French yields to 15-year highs.

“With yields now above those of the Netherlands, Finland and Austria, France seems in danger of slipping out of the ‘core’ to become more closely associated with the eurozone’s periphery,” said Jennifer McKeown, senior European economist at Capital Economics.

Though McKeown noted that France’s growth prospects are considerably better than the likes of Italy and Spain, she said no other eurozone economy with a triple-A rating has a higher debt than France’s, which stands at around 85 per cent of national income.

In addition, McKeown cautioned that France’s contribution to Europe’s bailouts are already boosting public debt at a time when French banks are already heavily exposed to the government debt of countries like Greece.

The Bank of France’s monthly industrial survey showed both corporate order books and factory utilisation rates falling for the second month in a row in July.

The benchmark in France recovered from earlier losses and was slightly up in early afternoon trading, but the DAX was 1.4 per cent lower, echoing Monday’s plunge on Wall Street, where the Dow Jones fell a dizzying 634 points, one of the worst days since 2008.

In a sign that Germany’s politicians are worried, the government called on all members of the eurozone to amend their constitutions “as quickly as possible” to require a balanced budget in a bid to avoid a repeat of the bloc’s sovereign debt crisis.

The European Union should also set up a new institution to monitor the member states’ competitiveness, keeping budgets and fiscal policies in check, German Vice Chancellor Philipp Roesler said.

Italy recently promised to work for a balanced budget amendment.

The negative sentiment on stock markets contrasted with somewhat declining tensions in Spanish and Italian bond markets, where intervention from the European Central Bank was starting to take its effect.

The yield, or interest rate, on Spanish 10-year bonds was at 5.03 per cent, after approaching 6.5 per cent just a week ago. The yield on Italian equivalents was at 5.14 per cent, also about one percentage point below where it was Monday morning before the ECB intervention.

“It is the worst crisis since World War II and it could have been the worst crisis since World War I if leaders hadn’t taken the important decisions,” ECB President Jean-Claude Trichet said with French radio station Europe 1, defending the bank’s decision to further intervene on bond markets.

Trichet didn’t directly confirm that the ECB has been buying up the bonds of Italy and Spain, saying only that his banks “is in the secondary market” for eurozone bonds and that it would release the amounts invested on Monday, as it does every week.

The ECB head also indicated that his bank still sees the main responsibility for fighting the debt crisis with eurozone governments and not the central bank.

“I won’t say” how long the ECB will buy bonds on the secondary market, Trichet said. “What we expect is that the governments do what we consider to be their jobs.”

Despite the ECB’s reluctance to take a central role in fighting the debt crisis, analysts have warned that it may not be easy for the bank to halt its bond-buying programme once the eurozone bailout fund has been equipped with its new powers.