MW: Europe stocks fall as investors take profits after big gains
European Central Bank keeps interest rates unchanged at a record low
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- European stocks edged lower on Thursday, as investors locked in some of the previous session's strong gains and showed reluctance to take big positions ahead of the release of more U.S. economic data.
The Stoxx Europe 600 index (ST:SXXP 257.82, -0.37, -0.14%) fell 0.04% to 258.11 points. It rose 2.7% on Wednesday, buoyed by strong manufacturing data from the U.S. and China.
Among the main regional European benchmarks, the U.K.'s FTSE 100 index (UK:UKX 5,360, -6.18, -0.12%) dropped 0.02% to 5,365.42 points and the French CAC-40 index (FR:PX1 3,625, +1.55, +0.04%) turned marginally positive, up 0.2% to 3,630.52 points. The German DAX index (DX:DAX 6,075, -8.95, -0.15%) declined 0.2% to 6,072.09.
Overnight, Asian stocks posted gains after the rally on Wall Street. However, U.S. stock-index futures pointed to a weaker open on Thursday, with investors on edge ahead of key non-farm payrolls data due tomorrow.
There is also a clutch of U.S. economic data expected later on Thursday, including pending home sales and weekly jobless claims.
"There's been a lot of discussion going on about whether this was the start of a new uptrend or a rally from an oversold position, because markets were oversold from yesterday," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels. "We still think not much has changed. We remain very cautious on equity markets in general."
"Now it's [the market] waiting for the new data point," he said, referring to tomorrow's payroll report. "We think that one will once again be negative...which will once again bring markets down. If after Friday, we see a continuation of the rally, we will start to think differently."
The telecoms and major banks sectors were leading decliners in Europe. Deutsche Bank (DB 63.65, -1.24, -1.91%) (DE:DBK 49.70, -1.12, -2.19%) fell 2.5% in Frankfurt and Allied Irish Banks (AIB 2.03, +0.08, +4.10%) (IE:AIB 0.76, -0.02, -2.05%) dropped 3.9%. Deutsche Telekom AG (DE:DTE 10.35, -0.11, -1.05%) fell 1.2% in Frankfurt.
In France, Pernod Ricard (PDRDY 16.00, +0.70, +4.58%) (FR:RI 61.30, -1.42, -2.26%) , the producer of wines and liquors, reported a marginal rise in fiscal 2010 net income, but sales dipped 1.7%. Shares fell 2% in Paris.
Other companies in the beverage sector were weak as well. Shares of Heineken Holding (NL:HEIA 35.34, -0.90, -2.49%) dropped 2.3% in Amsterdam, and Diageo (UK:DGE 1,091, -6.00, -0.55%) declined 0.6% in London.
Shares of Capgemini (FR:CAP 35.14, +0.58, +1.66%) rose 1.8% on news the consulting, technology and outsourcing group acquired a 55% stake in Brazilian IT company CPM Braxis.
Markets showed no reaction to news the European Central Bank left its key interest rate unchanged at 1% at a meeting in Frankfurt. A press conference by ECB President Jean-Claude Trichet will take place at 2:30 p.m. CET.
Sweden's Riksbank raised interest rates from 0.5% to 0.75%, the second consecutive increase, which Ben May, economist at Capital Economics, said "reflects concerns that domestic imbalances may be building.
"Further hikes seem likely in the near term, but the pace of monetary tightening should ease next year as the recovery loses steam," said May.
U.S. stocks surged Wednesday after the Institute for Supply Management reported a rise in its index of factory activity, providing some relief for investors who had feared much worse data. The Dow Jones Industrial Average closed 2.5% higher. See more on U.S. markets
