By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets headed toward a
more than six-week low on Monday, after Chinese manufacturing data
added to fears about a slowdown in the world's second-largest
economy and the further impact on the global markets.
The Stoxx Europe 600 index fell 0.8% to 320.20, adding to the
loss for January, when the benchmark posted the biggest monthly
decline since June.
Among notable movers, shares of Lloyds Banking Group PLC (LYG)
dropped 3.6% after the bank said it would set aside an extra 1.8
billion pounds ($3 billion) to repay customers who were mis-sold
payment-protection insurance. Despite the extra provision, the bank
said underlying earnings for the full year would come in ahead of
expectations and that it would reinstate dividends.
Shares of Julius Baer Gruppe AG slid 5.9% after the
private-banking firm said profit dropped 30% in 2013.
Shares of Colruyt SA sank 9.7% after the supermarkets chain late
Friday warned fiscal 2014 profit would be slightly lower than last
year's result. Citigroup on Monday cut the firm to neutral from
buy.
On a more upbeat note, shares of Ryanair Holdings PLC gained
6.2% after the budget airliner confirmed its full-year guidance,
even as it swung to loss in its fiscal third quarter.
More broadly, European stock markets weakened as investors
digested the latest data from China. The official purchasing
managers' indexes out over the weekend showed growth slowed down in
the manufacturing and services sectors in January. HSBC's PMI for
China showed earlier in January that the manufacturing sector
unexpectedly contracted for the month, igniting fears of an
economic slowdown and ultimately sparking a wider selloff in
emerging-markets assets.
Analysts at J.P. Morgan said in a note that slowing growth in
China will hurt the global economy, with a one percentage point
shock to China's GDP growth adding up to a 0.35 percentage point
spillover impact on the world's GDP expansion.
"The latest signs of stress are worrying many about the risk of
a hard landing. Unfortunately, assessing the risk to China and the
world is not easy. Will policy makers do whatever it takes to
prevent a major default? Should a financial event ensue, will
policy makers move aggressively to prevent a crisis?," they
asked.
With the China data in mind, investors largely shrugged off PMI
data for the euro zone. The final numbers on the manufacturing
sector for January showed the recovery at factories broadened, with
the reading on Greece pointing to expansion for the first time
since August 2009. For the combined euro zone, the manufacturing
PMI rose to 54, signaling the fastest improvement since May 2011. A
reading above 50 indicates expansion.
Howard Archer, chief U.K. and European economist at IHS Global
Insight, said economic growth in the euro zone is likely to
gradually strengthen in 2014 as a number of factors improve.
"Reduced fiscal squeezes, very accommodative monetary policy,
improving global growth and sharply reduced sovereign debt concerns
provide a more encouraging backdrop than the euro zone has faced
for some time," Archer said in a note.
PMI data for the U.K. also showed the manufacturing sector there
continued to expand in January, albeit at the slowest pace in three
months.
The U.K.'s FTSE 100 index fell 0.3% to 6,491.77. Germany's DAX
30 index dropped 0.8% to 9,231.24, and France's CAC 40 index lost
0.8% to 4,130.96.
Randgold Resources Ltd. gained 5.6% in London after the gold
miner said it boosted gold production to a record level in
2013.
Outside the major indexes, RTL Group SA dropped 2.1% in Brussels
after Goldman Sachs cut the broadcaster to neutral from buy.
Asian markets closed lower on Monday, while U.S. stock opened
weaker on Wall Street. The indexes in the U.S. took a leg lower
after the ISM manufacturing index dropped to the lowest level since
May.
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