By Barbara Kollmeyer, MarketWatch
London (MarketWatch)—Losses in shares of big manufacturing companies and miners drove Europe’s stock markets south Wednesday owing to weak data eurozone and U.S. data, though Spanish stocks bucked the trend after retailer Inditex SA zipped higher on upbeat results.
The Stoxx Europe 600 index XX:SXXP -0.95% declined 0.9% to 241.15, after rising 0.6% the prior session. Wall Street stocks opened lower.
Markets dipped deeper into negative territory in afternoon action after U.S. retail sales for May fell a second month, marking the first back-to-back drop in two years. Retail sales fall in May for second month in row
SKF AB SE:SKFA -7.26% dropped the most in the pan-European index, off 7.8%, after the maker of rolling bearings cut second-quarter forecast due to weaker market conditions in Western Europe and Asia. The announcement stirred concerns that profit warnings from other industrials such as Swedish machinery firm Sandvik AB SE:SAND -6.17% and Atlas Copco AB SE:ATCOA -4.67% would follow. Shares of Sandvik dropped 6.1%, while those of Atlas Copco fell 4.1%. SKF cuts demand forecast
Major industrial companies and miners were also weighed by news of a 0.8% drop in euro-zone industrial production in April compared to March, taking the level of production down to the lowest level since September 2010. The drop was slightly milder than expected, but would have been steeper had it not been for a rebound in energy production, said Chris Williamson, chief economist at Markit in a note.
“The weakness of the official data and the PMI (purchasing manager’s index) point to the need for further action to stimulate the ailing economy and prevent a further deepening of the downturn,” Williamson said. “The PMI has fallen even deeper into territory which is historically consistent with rate cuts by the ECB, suggesting a trimming of the policy rate below 1% alongside further LTROs would be appropriate according to the macroeconomic data.”
Swiss industrial conglomerate ABB Ltd. CH:ABBN -2.86% lost 2.5%. RIo Tinto PLC UK:RIO -1.46% RIO -1.00% fell 1.2% in London.
In Germany, Siemens AG DE:SIE -2.08% gave up 1.9%, weighing on the DAX 30 index DX:DAX -1.09% , which slipped 0.8% to 6,113.51.
Car makers were also weighing on the sentiment, with Daimler AG DE:DAI -3.22% losing 2.9%, Volkswagen AG DE:VOW -2.58% DE:VOW3 -3.16% off 3% and BMW AG DE:BMW -2.93% 2.5% lower.
Stan Pearson, head of European equities at Standard Life Investment, said it doesn’t make sense to focus on day-to-day turbulence for Europe, with the industrial production numbers just confirming what is known.
“Companies are not looking to invest and that’s a confidence problem. What we’re seeing is a degree of caution and that’s understandable from the companies’ perspective,” he said.
European companies may, however, be in better shape than their current stock prices indicate, Pearson explained.
“The turbulence and short-term focus on the next ECB meeting or next bond auction are actually opportunities to look beyond what happens next week and closer look at companies, he said. “There are a lot of European companies that will do reasonably well compares to government bonds with yields between 2% and 0% or other asset classes in distress.”
He mentioned Danish drug maker Novo Nordisk AS DK:NOVOB +0.25% and Dutch ASML Holding NV NL:ASML +1.03% as companies with strong investing stories at the moment.
Spanish stocks shine
Spanish retailer Inditex SA ES:ITX +10.30% also proved to be in decent shape despite difficult times for its home country, after first-quarter results beat forecasters’ expectations, sending the stock 10.3% higher. The gain helped lift the IBEX 35 index XX:IBEX +1.37% 0.9% to 6,583.30, making it one of the few indexes in black for the trading day.
Swedish retailer Hennes & Mauritz AB SE:HMB +2.00% rose 1.9%, helping underpin the Stoxx 600.
In France, power and transport firm Alstom SA FR:ALO -5.89% gave up 5.9%, while Schneider Electric SA FR:SU -5.68% slid 5.5%. The French CAC 40 index FR:PX1 -0.92% fell 0.7% to 3,026.77.
Outside the main index in Paris, shares of Establissements Maurel & Prom SA FR:MAU +19.94% were the top Stoxx 600 gainer, up 20% on reports that Royal Dutch Shell PLC RDS.A +0.62% UK:RDSA +0.36% is interested in buying the French oil group.
Faring less well in the retail space, shares of grocer J Sainsbury PLC UK:SBRY -3.30% fell 3.3% after a trading update failed to impress investors. Comparable sales excluding fuel increased 1.4% in the first quarter, while total sales rose 3.6%.
The FTSE 100 index UK:UKX -0.68% , slipped 0.3% to 5,457.14, with miners further keeping the index down. Xstrata PLC UK:XTA -5.07% fell 4.1%, Rio Tinto PLC UK:RIO -1.46% RIO -1.00% slid 1.4% and BHP Billiton PLC UK:BLT -1.37% BHP -0.67% gave up 1.2%. Metals prices were mixed.
Barbara Kollmeyer is an editor for MarketWatch in Madrid.
