U.S. weekly jobless claims rise, housing data to come
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — European stocks posted steep losses on Thursday after data showed euro-zone activity is slowing sharply and concerns over Ireland’s financial health returned in full f> ce.
Further weighing on sentiment was a rise in weekly claims f> unemployment benefits in the U.S. Data on existing-home sales and leading indicators f> August are due at 10 a.m. Eastern. U.S. stocks opened weaker, adding to the pressure on European markets.
The Stoxx Europe 600 index (ST:SXXP 258.94, -2.25, -0.86%) fell 1% to 258.63 f>llowing a decline of 1.4% on Wednesday. Banks clearly weighed on all markets across the board.
The French CAC 40 index (FR:PX1 3,678, -57.14, -1.53%) dropped 1.7% to 3,671.29, with banks leading the action. Natixis SA (FR:KN 4.22, -0.16, -3.72%) fell 3.5%, Crediit Agricole SA (FR:ACA 11.22, -0.40, -3.40%) dropped 3.4% and BNP Paribas SA (FR:BNP 53.49, -1.83, -3.31%) slipped 3.1%.
The German DAX 30 index (DX:DAX 6,145, -63.16, -1.02%) declined 1.6% to 6,140.08. Shares of Deutsche Post AG (DE:DPW 12.79, -0.37, -2.78%) fell 3% and Commerzbank AG (DE:CBK 6.13, -0.16, -2.56%) dropped 2.3%.
The declines came after a euro-zone survey of purchasing managers for September showed that activity was the slowest in seven months. The Markit composite PMI index fell to 53.8 from 56.2 in August. See story on euro-zone PMI data
“September’s plunge in the euro-zone PMI is the strongest sign yet that the euro-zone recovery is rapidly losing momentum and that parts of the region may already have fallen back into recession,” said Bob May, European economist with Capital Economics.
Stephen Pope, managing partner of Spotlight Ideas, said the market had gotten off to a positive start until the PMI data hit.
“We’ve been almost basking in the sunlight over very impressive growth numbers in Europe, but to suddenly see the PMI number come back took the stuffing out,” Pope said. “It shows the private sector is not capable of stepping up to the plate yet.”
He also said that he thought investors were getting too comfortable with debt issues for peripheral European countries.
The cost of insuring peripheral euro-zone government debt against default continued to soar on Thursday. The spread on the five-year Irish sovereign CDS rose to 490.8 basis points from 464.2 on Wednesday. Portuguese, Italian and Spanish CDS spreads also widened. Portugal sold €750 million in bonds on Wednesday, which was at the low end of the government’s expected range.
“Portugal didn’t get away too well and today we’ve seen the Irish spread push out,” said Pope. “There’s a massive reality nettle out there that nobody is prepared to grasp, because they don’t want to get stung.”
The Irish government reported a 1.2% drop in gross domestic product in the second quarter, against growth of 2.2% in the prior quarter.
Banks a drag
In a clear reflection of those worries, shares of Allied Irish Banks PLC (AIB 1.59, -0.07, -4.22%) (IE:AIB 0.58, -0.02, -3.19%) dropped 3.5%, while Spain’s Banco Santander SA (STD 12.27, -0.45, -3.54%) (ES:SAN 9.22, -0.25, -2.62%) 2.5%, helping to drag the IBEX-35 Index (XX:IBEX 10,434, -121.30, -1.15%) down 1.1%. Spain has also been the focus of major worries for investors, troubled by its deep recession.
The FTSE 100 index (UK:UKX 5,490, -62.16, -1.12%) fell 1.5% to 5,488.94. Lloyds Banking Group PLC (UK:LLOY 74.10, -1.75, -2.31%) (LYG 4.61, -0.11, -2.33%) slipped 2.3% and HSBC Holdings PLC (UK:HSBA 656.70, -7.30, -1.10%) (HBC 51.45, -0.62, -1.19%) was down 1.2%. The Financial Times reported that Douglas Flint, finance director for HSBC, is the likely candidate to replace outgoing Chairman Stephen Green.
Mining stocks offered no help for London, with shares of Antofagatsa PLC (UK:ANTO 1,182, -32.00, -2.64%) down 2.6% and Anglo American PLC (UK:AAL 2,494, -66.00, -2.58%) off 2.4%.
Shares of U.K.-Australian miner BHP Billiton (BHP 73.81, -0.71, -0.95%) (UK:BLT 1,969, -31.50, -1.58%) fell 1.5.%. Chief Executive Marius Kloppers told Canadian lawmakers that his company’s aim to buy Potash Corp. of Saskatchewan (POT 145.52, -0.81, -0.55%) would bring benefits to that country. The prior day Potash, which is battling the hostile $38.6 billion takeover bid by BHP, filed a lawsuit saying its rival has violated federal securities laws.
