MW; Europe stocks fall as investors take profits after big gains
ECB revises up growth estimates, will continue refinancing operations
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- European stocks edged lower Thursday, as investors showed reluctance to take big positions ahead of the release of potentially pivotal U.S. economic data.
The Stoxx Europe 600 index (ST:SXXP 257.97, -0.22, -0.09%) stood at 258.11 points, holding most of the 2.7% rally in the benchmark on Wednesday, gains that were buoyed by strong manufacturing data from the U.S. and China.
Among the main regional European benchmarks, only the French CAC-40 index (FR:PX1 3,632, +8.03, +0.22%) was in positive territory, up 0.2% to 3,630.52 points. The German DAX index (DX:DAX 6,084, +0.30, +0.01%) declined 0.2% to 6,072.09, as the U.K.'s FTSE 100 index (UK:UKX 5,369, +2.79, +0.05%) eased fractionally to 5,365.42.
Overnight, Asian stocks posted gains after the rally on Wall Street. U.S. stock-index futures edged higher on Thursday after weekly jobless claims fell 6,000 and productivity data showed a revised second-quarter decline of 0.9%, the first fall in five quarters.
Factory orders and pending home sales for July are still to come, but the biggest piece of data for the week will come on Friday with U.S. nonfarm payrolls for August.
"There's been a lot of discussion going on about whether this was the start of a new uptrend or a rally from an oversold position, because markets were oversold from yesterday," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels. "We still think not much has changed. We remain very cautious on equity markets in general."
He said there are a couple of seasonal factors at work as well, with the first day of September positive for markets about 70% of the time, and the first week of September leading up to the U.S. Labor Day holiday also normally positive for markets.
"Now it's [the market] waiting for the new data point," he said, referring to August payrolls. "We think that one will once again be negative ... which will once again bring markets down. If after Friday, we see a continuation of the rally, we will start to think differently."
Telecom shares and major banks were leading decliners in Europe.
Deutsche Bank (DB 63.25, -1.64, -2.53%) (DE:DBK 49.47, -1.35, -2.65%) shed 2.5% in Frankfurt and Allied Irish Banks (AIB 2.02, -0.01, -0.49%) (IE:AIB 0.77, -0.01, -1.03%) dropped 3.9%. Deutsche Telekom (DE:DTE 10.38, -0.08, -0.72%) fell 1.2% in Frankfurt.
In France, Pernod Ricard (PDRDY 16.00, +0.70, +4.58%) (FR:RI 60.94, -1.80, -2.87%) , the producer of wines and liquors, reported a marginal rise in fiscal 2010 net income, but sales dipped 1.7%. Shares fell 2% in Paris.
Other companies in the beverage sector were weak as well. Shares of Heineken Holding (NL:HEIA 35.44, -0.76, -2.10%) dropped 2.3% in Amsterdam, and Diageo (UK:DGE 1,090, -7.00, -0.64%) (DEO 67.20, -0.34, -0.50%) declined 0.6% in London.
Shares of Capgemini (FR:CAP 35.15, +0.58, +1.68%) rose 1.8% on news the consulting, technology and outsourcing group acquired a 55% stake in Brazilian information-technology company CPM Braxis.
Euro-zone growth forecast lifted
Markets showed no reaction to news the European Central Bank left its key interest rate unchanged at 1% at a meeting in Frankfurt. The central bank also revised higher its euro-zone growth estimates, with forecasts of 1.4% to 1.8% for 2010 and a range of 0.5% to 2.3% for 2011. See more on the decision on euro-zone interest rates and commentary from European Central Bank chief Jean-Claude Trichet.
Earlier, Sweden's Riksbank raised interest rates from 0.5% to 0.75%, the second consecutive increase, which Ben May, economist at Capital Economics, said "reflects concerns that domestic imbalances may be building.
"Further hikes seem likely in the near term, but the pace of monetary tightening should ease next year as the recovery loses steam," said May.
U.S. stocks surged Wednesday after the Institute for Supply Management reported a rise in its index of factory activity, providing some relief for investors who had feared much worse data. The Dow Jones Industrial Average closed 2.5% higher.
Wall Street's equity benchmarks opened flat in Thursday's trading. See more on U.S. markets
