Banks join drug and resoures stocks on the downside
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — European stocks moved deeper into negative territory Wednesday, with banks, oil and drug stocks all in the red after the release of U.S. economic data.
The Stoxx Europe 600 index (ST:SXXP 264.61, -1.79, -0.67%) fell 0.4% to 265.23 after closing down 0.02% on Tuesday.
Losses for Europe picked up after the Empire State factory index fell to 4.1 in September, the lowest level since July 2009, against expectations for a gain to 7.5. U.S. import prices rose 0.6%, marking the biggest gain since April.
August industrial production data rose 0.2%. U.S. stocks opened weaker in the wake of the data.
Central bank intervention was on investors’ minds, with Japan jumping in overnight to stop the rising yen, an action which some in the market think will have only limited effect. See dollar gains as Japan intervenes
But the big focus for Europe was a prediction by Goldman Sachs that the Federal Reserve might have to buy $1 trillion worth of Treasurys to support the economy.
Over the weekend, markets learned the European Central Bank bought €237 million of government bonds last week, picking up Greek, Portuguese and Irish paper, supporting the view euro-zone troubles are still on investors’ minds.
Philippe Gisels, head of research at BNP Paribas Fortis Global Markets in Brussels, said markets in Europe on Wednesday were selling off from highs seen earlier in the week, but investors remains very nervous about central-bank action.
“We are underweight equities and not too positive because we see quite a bit of risks in the market. In case of a double-dip recession (in the U.S.), equities go to the downside, but you can’t be too negative either. You do that and you’re fighting the Federal Reserve and the European Central Bank.
“They want to keep assets up to fight inflation and a depression,” said Gisels. “You can approach it from two ways: you’re a long-term investor who doesn’t mind short-term volatility or you try to time the market, but that’s been notoriously difficult this year . . . it’s a very dangerous market, there is quite a bit of risk.”
Euro-zone data on consumer prices for August showed annual inflation slowing to 1.6% against 1.7% in July.
Banks join drug, oil and miners in the red
Selling picked up for bank stocks as the afternoon progressed. Deutsche Bank AG (DB 62.74, -0.80, -1.26%) (DE:DBK 48.26, -0.92, -1.87%) fell 2% and Deutsche Post AG (DE:DPW 13.36, -0.17, -1.26%) fell 1.4%. Deutsche Post shares have been on the decline since Deutsche Bank officially announced its intention to submit a takeover offer for the lender on Monday.
The German DAX-30 index (DX:DAX 6,241, -34.12, -0.54%) slipped 0.5% to 6,240.47.
The French CAC-40 index (FR:PX1 3,746, -27.98, -0.74%) fell 0.8% to 3,745.20, with Credit Agricole SA (FR:ACA 11.32, -0.37, -3.17%) down 2.5% and BNP Paribas SA (FR:BNP 55.33, -0.80, -1.43%) down 1.5%. Lagardere SCA (FR:MMB 29.69, -0.47, -1.54%) fell 1.5%. Away from financials, Vivendi SA (FR:VIV 19.48, -0.34, -1.72%) fell 1.5%.
Autos were higher in Paris, with Peugeot SA (FR:UG 24.18, +0.81, +3.45%) up 2.8% and Renault SA (FR:RNO 36.37, +0.62, +1.72%) up 1.7%. Peugeot was upgraded to overweight from underweight at Morgan Stanley, which upped estimates for 2011 earnings per share by 76%.
In London, drug, mining and oil stocks fronted losses. AstraZeneca PLC (AZN 51.96, -0.52, -0.99%) (UK:AZN 3,345, -40.50, -1.20%) shares fell 1.3% on news that the U.S. Food and Drug Administration will need more time to complete its review of the anti-clotting drug ticagrelor.
GlaxoSmithKline (GSK 39.82, +0.05, +0.12%) (UK:GSK 1,278, -4.50, -0.35%) fell 0.5% after Jefferies International downgraded the stock to hold from buy, citing rising risk for the firm’s Avandia drug.
Losses for mining shares intensified as commodity prices fell back. Gold for December delivery fell $2 to $1,268.70 an ounce, off Tuesday’s record high. African Barrick Gold PLC (UK:ABG 599.50, -19.50, -3.15%) slid 3.3%, Eurasian Natural Resources Corp. PLC (UK:ENRC 861.50, -23.00, -2.60%) slid 2.7%.
BP PLC (BP 38.02, -0.50, -1.30%) (UK:BP. 407.50, -7.70, -1.86%) fell nearly 2% in London, after a report in the Financial Times said the oil giant was cited for safety lapses in the North Sea in 2009. Also, Bloomberg News said the company might ease requirements for claims over the Gulf of Mexico oil spill. Kenneth Feinberg, who is in charge of administering compensation, said Tuesday at a meeting in Florida that restaurants and hotel owners should apply regardless of proximity to the coastline.
The U.K. FTSE 100 (UK:UKX 5,545, -22.01, -0.40%) fell 0.4% to 5,543.99. On the plus side in London, Next PLC (UK:NXT 2,164, +124.00, +6.08%) shares rose nearly 6% after the retailer lifted its dividend and reported a rise in profit. Read story on Next
Meanwhile, shares of Nokia Oyj (NOK 9.85, -0.09, -0.91%) (FI:NOK1V 7.56, -0.08, -0.98%) fell 1%, extending a recent decline for the stock. The management shake-up at Nokia intensified on Tuesday after it emerged Chairman Jorma Ollila will step down in 2012.
Gamesa Corporacion Tecnologica SA (ES:GAM 5.52, -0.18, -3.14%) shares fell 3.3% in Madrid after Citigroup downgraded the stock to sell from hold, saying it expects volume recovery in high-margin markets to be delayed. While the slowdown could be partially offset by volume growth in Latin America, China and India, the investment bank noted these are lower-margin markets.
