By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets ended a volatile Wednesday trading session on a downbeat note, with banks and miners leading declines, although well-received U.S. economic growth data had briefly sent stocks into positive territory.
The Stoxx Europe 600 index XX:SXXP -0.12% fell 0.1% to close at 267.01, its lowest closing value since Aug. 6.
“Recent weeks have been categorized by low volumes and sluggish activity, and we are very much still in holiday mode. Next week we can expect activity to pick up again,” said Peter Dixon, strategist at Commerzbank in London.
He further pointed to underlying worries about the slowdown in global growth as a concern for markets, as it is likely to “weigh on earnings expectations.”
“This is a conflicting issue. We’ve got the recovery rally, but then we’ll start to run into problems of what slow growth will do to earnings,” Dixon added.
Bouygues SA FR:EN -8.95% posted the biggest drop in the pan-European index, off 9%, as the construction-to-telecom firm said it expects full-year profit for its mobile unit to come in lower than earlier forecast. See: Bouygues sees mobile phone profit falling further.
The broader European stock markets shortly reversed direction in afternoon action, after data showed the U.S. economy grew at a 1.7% rate in second quarter versus an earlier estimate of 1.5%. See: U.S. grew at 1.7% pace in second quarter.
U.S. stocks were higher on Wall Street. Read about U.S. markets
Investors were also waiting for U.S. Federal Reserve Chairman Ben Bernanke to talk at a conference in Jackson Hole, Wyo. on Friday, where any hints of further easing action to boost the economy will be scrutinized.
“Most people are not 100% convinced we’ll get any clear signs from the Fed, and that may be a reason people are a little disappointed. They are selling off in advance,” Commerzbank’s Dixon said.
The European Central Bank’s interest-rate decision next week was also a focus for investors.
“ECB President [Mario] Draghi’s announcement yesterday that he and other ECB board members will not be present at the Jackson Hole conference later this week has increased expectations that the ECB will announce a more comprehensive strategy for its bond purchases in connection with next week’s ECB meeting,” analyst at Danske Bank said in a note.
An interest-rate cut is also likely to be on the table and analysts at Morgan Stanley forecast that the governing council will cut the refi rate by 25 basis points to 0.5%.
“But in addition to this, we still think that the ECB has multiple levers it could pull to combat the sovereign-debt crisis. In our view, the most powerful policy combination would be to use the [European Financial Stability Facility] for primary market support (especially partial risk protection) and complement it with ECB support in the secondary market,” they said in a note.
Portugal’s debt situation was also in the spotlight, after the Portuguese daily Economico reported that the country may get a break on its 2012 deficit target from the troika of the European Union, European Central Bank and International Monetary Fund. See: Portugal may get leeway on 2012 budget: report
The PSI 20 index PT:PSI20 -0.03% closed slightly lower at 4,977.94.
Movers
Risk sensitive sectors, such as banks and resource firms, were among the biggest decliners in Europe.
Spain’s Banco Santander SA ES:SAN -1.53% SAN -1.87% fell 1.5% and put pressure on the IBEX 35 index XX:IBEX -0.37% . The index lost 0.4% to 7,306.00.
In the U.K., miners dragged the benchmark index lower, as metals prices dropped across the board. Rio Tinto PLC UK:RIO -3.09% RIO -2.86% lost 3.1% and BHP Billiton PLC UK:BLT -1.47% BHP -1.07% fell 1.5%.
The FTSE 100 index UK:UKX -0.56% slid 0.6% to 5,743.53, further weighed by HSBC Holdings PLC UK:HSBA -0.84% HBC -0.59% HK:5 -0.29% , off 0.8%, and Barclays PLC UK:BARC -1.38% BCS -0.93% , down 1.4%.
Among German stocks, Deutsche Lufthansa AG DE:LHA -1.30% dropped 1.3% amid failed negotiations between the airline and German labor union UFO, representing the cabin crew, which could lead to strikes. UFO, however, said there won’t be a strike Wednesday. See: German union: No Lufthansa cabin-crew strike.
The DAX 30 index DX:DAX +0.11% , however, closed 0.1% higher at 7,010.57.
Linde AG DE:LIN +0.60% rose 0.5% as Exane BNP Paribas increased the chemicals firm’s target price 5%.
Outside the major indexes, utility firm Fortum Oyj FI:FUM1V +1.07% rose 1.1%, as J.P. Morgan Cazenove lifted the Finnish firm to neutral from underweight.
Akzo Nobel NV NL:AKZA +2.57% shares climbed 2.6% to €46.62. Credit Suisse analyst Chris Counihan lifted his rating on the Amsterdam producer of paints and coatings to outperform from neutral and increased his target price on the shares to €52.50 from €45.
Nokia Corp. FI:NOK1V -8.25% NOK -7.58% on the other hand, tumbled 8.3%, as an analyst called the stock’s rally following Apple Inc.’s AAPL -0.05% patent victory “unwarranted”. See: Nokia falls as analyst calls run-up 'unwarranted'
Sara Sjolin is a MarketWatch reporter, based in London.
