MW: Europe stocks erase gains after U.S. jobs data
Reports of oil sheen in Gulf of Mexico drag Shell south
By Barbara Kollmeyer and Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets shifted lower again on Thursday after disappointing U.S. data, while Royal Dutch Shell PLC dropped on reports of an oil slick. Meanwhile, peripheral banks came under pressure after a heavily discounted rights issue from Banco Espirito Santo SA.
The Stoxx Europe 600 index XX:SXXP -0.10% was slightly lower at 254.36, after trading as high as 255.86 earlier in the day.
Markets were sent south in a choppy session in afternoon trade after jobless data from the U.S. disappointed analysts’ expectations. Initial claims jumped by 13,000 last week to 380,000, while claims from two weeks ago were revised up to 367,000 from 357,000. U.S. stock futures, however, pointed to a slightly higher open on Wall Street.
In Europe, Portugal’s PSI 20 index PT:PSI20 -1.99% sank 2% to 5,204.56, with shares of Banco Espirito Santo PT:BES -0.26% tumbling 12.7% to around 1 euro. The bank said late Wednesday that it will seek to raise up to 1 billion euros ($1.3 billion) in a rights issue aimed at lifting capital.
The bank is issuing up to 2.56 billion new shares at €0.395 each. That’s a 66% discount on the prior day’s close of €1.17.
“The capital increase has not been received well by the southern European markets. Investors think it can have a spill-over effect and markets are saying the next ones to apply the exact same measure are the Spaniards and the Italians,” said Predrag Dukic, senior equity sales trader at CM Capital Markets in Madrid.
Spain’s IBEX 35 index XX:IBEX -1.85% dropped 1.9% to 7,433.00, adding to recent steep losses following concerns about the country’s economic situation and efforts to bring down its budget deficit.
“Markets are saying, ‘We don’t give much credibility because you have not been able to meet the deficit target before and you won't be able to grow because of the cuts’. It’s a vicious circle,” Dukic said. “Investors question Spain’s sustainability and the Spanish sovereign state and that depresses markets.”
BBVA SA ES:BBVA -3.30% ES:BKT -1.71% lost 3.1% and Banco Santander SA ES:SAN -2.72% was off 2.7%.
Analysts at Nomura Equity Research said in a note that profitability for Spanish banks remains under pressure as asset quality and loan-loss provisions weigh on results.
“We expect economic news flow to remain negative as the government battles to control the deficit and asset quality trends in Spain deteriorate further,” the analysts said.
In Italy, the government saw borrowing costs rise in a three-year government bond auction. The auctions was watched closely by investors given pressures seen recently in Italian and Spanish 10-year government bond yields. In the secondary market, yields for Spain ES:10YR_ESP -0.36% fell 3 basis points to 5.80%, while those for Italy IT:10YR_ITA -0.37% eased 1 basis points to 5.41%. Borrowing costs rise as Italy sells 3-year bond
The Italian FTSE MIB index XX:FTSEMIB -0.68% was off 0.7% at 14,578.20, with Banca Monte dei Paschi di Siena SpA IT:BMPS -2.82% 3% lower.
Elsewhere, Royal Dutch Shell PLC UK:RDSA -5.07% UK:RDSB -4.88% RDS.A +1.19% RDS.B +2.29% weighed heaviest on the Stoxx 600. Shares sank 4.9%, after the oil group said late Wednesday a ‘light sheen’ had been observed in a central portion of the Gulf of Mexico, where the firm has operations. Shell said the source of the sheen is unknown. Shell drops on Gulf of Mexico oil slick report
The FTSE 100 index UK:UKX -0.28% was off 0.3% at 5,618.79, further pressured by BP PLC UK:BP -2.07% BP -0.59% down 2.1%.
U.K. miners, however, supported the index as most metals prices rose. Heavyweight Rio Tinto PLC UK:RIO +2.46% RIO +1.32% rose 2.4%, BHP Billiton PLC UK:BLT +1.10% BHP +0.48% added 1.1% and Xstrata PLC UK:XTA +1.39% gained 1.5%.
Data for the euro zone showed industrial production rose 0.5% in February, and fell 1.8% on an annual basis. Economists surveyed by Dow Jones Newswires had forecast a 0.2% monthly decline and a 1.7% year-on-year fall.
The French CAC 40 index FR:PX1 -0.49% was 0.5% lower at 3,221.06, with Société Générale SA FR:GLE -2.11% off 2% and Credit Agricole SA FR:ACA -2.23% 1.9% lower.
Oil servicing firm Technip SA FR:TEC +1.79% rose 1.9% after it was awarded a €245 million contract by Chevron Corp. CVX -0.49% for a project offshore North Western Australia.
The German DAX 30 index DX:DAX -0.04% slipped 0.1% to 6,670.26, with Commerzbank AG DE:CBK +4.61% down 2.3%.
Infineon Technologies AG DE:IFX -0.84% jumped to the top of the index and added 4.9% after Deutsche Bank lifted the stock to buy from hold.
Among other notable movers in Europe, Nokia Corp. FI:NOK1V -5.81% sank 5.8% after Société Générale cut the stock to hold from buy following Wednesday’s profit warning from the telecom firm.
