LONDON (MarketWatch) — European stock markets ended a highly volatile trading session with moderate gains, as investors grappled with mixed economic signals from the U.S. and global growth worries, while drug makers pushed higher.
The Stoxx Europe 600 index XX:SXXP +0.18% seesawed between small gains and losses for most of the session and closed the day with a 0.2% gain at 256.73, after closing out last week with a 0.7% gain.
“Investors are looking for direction from the corporate side. All attention has been on the sovereign problems with markets looking to the politicians for solutions and now we have to see how corporations are guiding for the second half of the year,” said Ian Hunter, senior equity strategist at Dolmen Stockbrokers.
“Estimates have been lowered over the last month or so,” he added. “The impact of the debt crisis in Europe is pushing things down.”
U.K.-listed security firm G4S PLC UK:GFS -8.65% dropped most significantly among stocks in the pan-European index, plunging 8.7%, following a round of broker downgrades after the firm late Friday warned it would incur a loss of between 35 million pounds ($54.5 million) and ÂŁ50 million in its Olympic Games contract. Read more about G4S's Olympic contract loss
Pointing in the other direction, Skandinaviska Enskilda Banken AB SE:SEBA +8.22% jumped 8.2% after second-quarter earnings beat market expectations.
Elsewhere, banks dragged the market lower in Spain, where the IBEX 35 index XX:IBEX -1.99% tumbled 2% to 6,532.10. Banco Popular Español SA ES:POP -2.66% gave up 2.7%, and Banco Santander SA ES:SAN -3.32% SAN -3.14% slipped 3.3%, while BBVA SA ES:BBVA -3.11% BBVA -3.30% fell 3.1%.
Yields on 10-year Spanish government bonds ES:10YR_ESP +0.02% rose 17 basis points to 6.76%, according to electronic trading platform Tradeweb.
The Wall Street Journal reported that the European Central Bank has advocated imposing losses on holders of senior bonds issued by struggling banks, a suggestion finance ministers have rejected in fear that it would stir up financial markets. ECB backed losses for Spain bank bondholders
The paper also reported that Spain’s finance minister expects a memorandum of understanding with the European Union for a 100 billion euro ($122.5 billion) bailout of the country’s banking sector to be signed on Friday. The agreement is expected to give loans of up to 15 years at interest rates under 3%.
Further related to the euro-zone banking crisis, the German Federal Constitutional Court said it would announce a decision on Sept. 12 on lawsuits challenging the country’s participation in the European Stability Mechanism and the region’s fiscal compact. Top German court to announce ESM ruling Sept. 12
Mixed U.S. data
In the U.S., retail sales were below market expectations, while the Empire State manufacturing index was stronger than anticipated. U.S. retail sales sink 0.5% in June Empire State index rebounds slightly in July
“The Empire State index was much better than expected, but we are getting mixed signals. The second quarter has shown slightly weaker numbers than we had in the first quarter, which signals a potential softening of the recovery,” said Hunter from Dolmen Stockbrokers.
Hunter said that investors were waiting for any hints of further quantitative easing from the U.S. Federal Reserve. Fed Chairman Ben Bernanke will deliver his semiannual congressional testimony on Tuesday and Wednesday.
U.S. stocks traded lower on Wall Street.
In France, the CAC 40 index FR:PX1 -0.03% closed marginally lower at 3,179.90, weighed by Peugeot SA FR:UG -6.80% , off 6.8%.
Among U.K. stocks, mining firms were on the decline, as metals prices dropped following remarks over the weekend from Chinese Premier Wen Jiabao that the economic rebound in China wasn’t yet stable, according to a state-media report. The comments came after government data Friday showed China’s second-quarter economic growth slowed to 7.6% from a year earlier, compared to 8.1% in the first quarter. Read more in Asia Markets
In addition, the International Monetary Fund lowered its forecast for China’s economic growth this year and next, and warned of the possibility of a hard landing in the medium term. The fund also cut its world economic outlook by 0.1 percentage point this year to 3.5%. Read more about IMF lowering its forecast
Heavyweight miner Rio Tinto PLC UK:RIO -1.13% RIO -1.11% lost 1.1%, Anglo American PLC UK:AAL -1.12% gave up 1.1% and BHP Billiton PLC UK:BLT -0.58% BHP -1.14% slid 0.6%.
The U.K. FTSE 100 index UK:UKX -0.07% gave up 0.1% to 5,662.43, further weighed by banks. Barclays PLC UK:BARC -2.74% BCS -3.22% fell 2.7% and HSBC Holdings PLC UK:HSBA -0.57% HBC -0.34% dropped 0.6%.
GlaxoSmithKline PLC UK:GSK +0.41% GSK +0.67% bucked the trend and nudged 0.4% higher, after Human Genome Sciences Inc. HGSI +4.57% agreed to the U.K. drug maker’s $3.6 billion takeover bid. Human Genome agrees to Glaxo's $3.6B bid
Among other drug makers, Roche Holding AG CH:ROG +0.96% added 1%, while Novo Nordisk AS DK:NOVOB +0.68% NVO +0.70% gained 0.7%.
In Germany, the DAX 30 index DX:DAX +0.13% inched 0.1% higher to 6,565.72. Metro AG DE:MEO +2.39% gained 2.3% after UBS lifted the stock to neutral from sell.
Outside the major country-specific indexes, H&M Hennes & Mauritz SE:HMB -1.09% shed 1.1% after June sales missed analyst expectations. H&M's sales up 13%; same-store sales rise 3%
