By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- European stocks were swathed in red on
Thursday after weaker-than-expected preliminary data on China's
manufacturing activity, which compounded some hawkishness within
the minutes of the Federal Reserve's January meeting.
Economic data from the euro zone didn't help the Stoxx Europe
600 index much either, and it fell nearly 1% to 331.80, after
closing up 0.1% on Wednesday. French consumer prices tumbled, while
preliminary German purchasing manager index data were mixed.
Decliners heavily outweighed gainers for the index, with banks,
drugs and mining stocks driving the losses.
Aerospace companies were also a drag, with BAE Systems PLC
(BAESY) slumping nearly 9% after the company posted a fall in 2013
net profit and guided lower for 2014 earnings. A day earlier,
Germany canceled a multi-billion-euro order for the Eurofighter
Typhoon jets, and that overshadowed news about completion of talks
to reprice a deal to sell that aircraft to Saudi Arabia.
Plenty of earnings news was moving other shares as well.
Randstad Holdings NV slid over 8%. The Dutch staffing group said it
swung to a profit in the fourth quarter of 2013 and revenue rose
1%, and also expects a gradual recovery to continue.
Shares of packaging company Rexam PLC fell 7.5% after posting a
rise in full-year earnings as it won back North American market
share, but also saw weakness in Western Europe and South
America.
Aegon NV fell over 6% after the Dutch insurer posted a 60% slide
in net profit owing to hedging losses.
On the upside, shares of Technip SA rose close to 6% after the
French oil-services company said it expects operating margin at its
key subsea unit of 12% in 2014, down from 13.5% in 2013. The
company also said the board approved a 10% dividend increase.
Setting the stage for European stocks, Asia markets suffered
losses across the board after sluggish trade data out of Japan and
a contraction in China's manufacturing sector to a seven-month low,
based on a preliminary HSBC/Markit "flash" version of its
Purchasing Managers' Index.
Though analysts said the data may not be representing the full
picture for Chinese factories, the data only added to some gloom
triggered by Wednesday's Fed minutes that showed some members
calling for a rise in rise in short-term interest rates as early as
mid-2015.
Craig Erlam, market analyst with Alpari U.K., said investors
need to remember that the China numbers fell into surprise negative
territory only last month. "In January, this was the straw that
broke the camel's back and prompted huge capital outflows from
emerging markets as investors panicked about an emerging market
crisis this year due to Fed tapering," he said.
While the same situation may not develop, Erlam said investors
may just get more cautious on the back of this, given they've "seen
how quickly one poor number can escalate into significant risk
aversion."
In Europe, Markit reported the flash German manufacturing PMI
fell to 54.7 from 56.5 in January, a two-month low. The German
Services Activity Index was at a 3-month high of 55.4 from 53.1 in
January. Euro-zone wide data will be released later.
French consumer prices posted a record fall in January,
retreating 0.6% from December, which was more than expected from
analysts polled by The Wall Street Journal.
The French CAC 40 was holding up better than most other indexes,
down 0.5% to 4,318.92, after heavyweight Danone SA rose over 2% The
company said sales growth would be steady this year as it posted a
fall in net profit and operating profit also fell.
Also in Paris, Veolia Environnement SA shares rose close to 3%
after announcing a EUR500 million ($685 million) contract to handle
waste management in Buenos Aires.
The German DAX 30 index fell 1.3% to 9,537.74, with Bayer AG off
1.6% and BASF SE down 1.7% -- both are heavyweights in the
index.
The FTSE 100 index fell 0.5% to 6,765.90.
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