By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — Hopes for further monetary stimulus in the U.S. failed to sustain a positive trading session for European stock markets on Thursday, as weak U.S. and euro-zone data weighed on sentiment.
The Stoxx Europe 600 index XX:SXXP -0.46% lost 0.5% to 267.93. On Wednesday, the index dropped 1.2%, its worst daily performance since early August.
“The PMIs we got today are consistent with the euro area falling into recession in third quarter. They point to GDP falling to minus 0.5%, which would be the worst quarter in three-and-a-half years,” said Gustavo Bagattini, European economist at RBC Capital Markets.
Risk-sensitive sectors, such as banks and resource firms, were among the biggest movers on European stock markets.
Banco Santander SA ES:SAN -1.55% SAN -2.15% gave up 1.7% and Royal Bank of Scotland Group PLC UK:RBS -1.57% RBS -1.47% fell 1.6%.
French oil group Total SA FR:FP -1.67% TOT -1.83% slipped lost 1.7% as Moody’s Investors Service changed the outlook on the firm to negative from stable.
Bucking the trend, Credit Suisse Group AG CH:CSGN +1.25% CS +1.52% added 1.2% on the back of an upgrade to buy from hold by Deutsche Bank.
Hopes for further central bank easing
Broader sentiment was initially lifted by hopes that the U.S. Federal Reserve will push the button for another round of quantitative easing, after minutes from the Federal Open Market Committee’s latest meeting showed policy makers actively discussed fresh bond purchases. The minutes were released late Wednesday. See: Fed minutes show active discussion of QE3
“What was surprising was the fact that if QE3 happens, it’s likely to be open-ended. That basically means that the Fed wouldn’t put a cap on the amount or timing,” said Bagattini
“The minutes are a bit stale, though, as they are three weeks old and data out of the U.S. have come out better in that period,” he added. “If we get another decent payrolls report in September, it may put QE3 on hold for the time being.”
In China, speculation about further monetary stimulus was also on the agenda as weak manufacturing data raised calls for Beijing to act to stimulate growth in the country. China’s weak factory data prompt calls for easing
Back in the euro zone, stock markets pared gains after the Markit preliminary composite purchasing-managers index for August indicated that the region’s economy contracted for a seventh consecutive month. See: Euro-zone Aug. PMI signals further contraction
“The data are consistent with our view that the [European Central Bank] will cut the interest rate by 25 basis points. The perspective of the ECB being active in the bond markets as well is providing some degree of support,” Bagattini said.
“I would remain cautious, both in terms of stimulus from the U.S. and the ECB. It’s not a given these things will happen. [The easing measures] are quite conditional and markets could get disappointed if they don’t materialize.”
European stocks were further taken off opening gains, as German Finance Minister Wolfgang Schaeuble told a German radio broadcaster that giving Greece more time or money to implement austerity measures would not help the country out of its problems. See: Germany's Schaeuble: More time won't help Greece
In the U.S. data showed jobless claims for last week rose by 4,000 to 372,000, slightly above analysts estimates.
U.S. stock futures pointed to a lower open on Wall Street.
Movers
In Germany, utility firms weighed on the DAX 30 index DX:DAX -0.70% , which shed 0.7% to 6,967.44.
RWE AG DE:RWE -2.51% fell 2.4%, as investors still were disappointed with yesterday’s news that a sale of a subsidiary “was canceled because the parties didn’t agree on a price,” according to Michael Schaefer, analyst at ESN-Equinet Bank.
Peer firm E.ON AG DE:EOAN -1.43% fell 1.5%.
Among notable French stocks, other than Total, Credit Agricole SA FR:ACA -2.33% lost 1.7% and BNP Paribas SA FR:BNP -1.56% gave up 1.8%.
The CAC 40 index FR:PX1 -0.83% slipped 0.9% to 3,431.16.
U.K.
The U.K. FTSE 100 index UK:UKX +0.15% advanced 0.1% to 5,780.67, partly lifted by the country’s mining sector as metals prices moved higher. Resource firms tend to be among biggest movers on both positive and negative trading days, as they are sensitive to indications of global economic growth.
Vedanta Resources PLC UK:VED +1.77% picked up 1.8% and BHP Billiton PLC UK:BLT +1.00% BHP -0.07% added 0.9%.
Pointing in the other direction, SABMiller PLC UK:SAB -1.01% slipped 1% after Nomura cut the brewer to reduce from neutral.
Outside London’s benchmark index, gold miner Petropavlovsk PLC UK:POG -17.17% tumbled 18% as first-half profit sank 90%. See: Petropavlovsk net profit sinks 90%, hit by charges
Dutch grocer Royal Ahold NV NL:AH -4.20% slid 4% after posting a cautious outlook. It posted a 25% gain in second-quarter profit. See: Ahold posts solid quarter, remains cautious
Heineken NV NL:HEIA +1.67% rose 1.2% as Nomura lifted to stock to neutral from reduce.
Sara Sjolin is a MarketWatch reporter, based in London.
