By Sara Sjolin, MarketWatch LONDON (MarketWatch) — European stocks slumped on Wednesday, as investors digested fresh data from the U.S. to gauge if it could trigger the Federal Reserve to taper its stimulus program. The Stoxx Europe 600 index XX:SXXP -1.16% dropped 1.1% to 296.28, after gaining 0.3% on Tuesday. The index has over the past few weeks been swinging between gains and losses, as worries that the Fed could soon scale back its easing program kept investors on the sidelines. The pan-European benchmark closed out May higher for a 12th consecutive month, with analysts largely attributing the gains to the aggressive stimulus measures from central banks globally. “I’m a big believer that markets are only at these levels because of [quantitative easing] and the Fed expanding its balance sheet to $3.3 trillion. That’s an enormous influx into the market and supportive of stocks and risk assets and investors will be concerned without that. It’s difficult to gauge how much the stock market will reaction to [an end to QE],� said Richard Perry, chief market strategist at Central Markets in London. Shares of Tesco PLC UK:TSCO -4.62% TSCDY -4.28% gave up 4.7%, after the supermarket retailer said comparable sales for the fiscal first quarter dropped in the U.K. Another supermarket chain, Carrefour SA FR:CA -3.95% slumped 3.8% in Paris after HSBC cut the French firm to underweight from neutral. On a more upbeat note, shares of Elekta AB SE:EKTAB +6.79% jumped 6.9%, after the medical-tech firm said it expects sales to grow more than 10% in the 2014 fiscal year. It also reported a 16% rise in sales for the 2013 full fiscal year. Investors in Europe also looked east, where Japan’s prime minister delivered his long-awaited speech on how to boost the country’s economy, but failed to meet expectations. The growth strategy revealed plans to attract foreign funds and boost investment and wages, but dodged some of the tough decisions needed to fix the economy, analysts pointed out. The Nikkei Stock Average JP:NIK -3.26% ended 3.8% lower. In the afternoon attention turned to the U.S., where the ADP jobs report showed 135,000 private-sector jobs were added to the economy in May, falling short of analyst expectations. Markets tend to look to the ADP for guidance on the official U.S. labor data, including the much anticipated nonfarm-payroll report and unemployment rate out on Friday. Analysts are closely monitoring macroeconomic reports from the U.S., after Fed Chairman Ben Bernanke said last month that the central bank could begin to scale back its $85-billion-a-month in coming months, if data continue to improve. In that light, a positive reading on the labor market could actually trigger a selloff in the stock market, as it may lead to a reduction in the Fed’s liquidity injections. “It seems like Bernanke is testing the waters before formally talking about tapering off and the market reaction has been pretty bad,� Perry from Central Markers said. “The committee has certainly become more hawkish and the members are getting a little worried about how long they can continue [QE] without it having a lasting impact on the market in terms of expectations,� he added. U.S. stocks traded lower on Wall Street. On the data front in Europe, euro-zone retail sales painted a bleak picture of the spending patterns in the region. Retail sales dropped 0.5% in April, worse than the decline of 0.2% registered in March. The food, drinks and tobacco sector fell 2%, while nonfood rose 0.6%. In the U.K., the services purchasing managers’ index rose to 54.9 in May from 52.9 in April, signaling the fastest pace of growth since March 2012. U.K.’s FTSE 100 index UK:UKX -1.75% , however, slid 1.7% to 6,444.16, weighed by Tesco and banks. France’s CAC 40 index FR:PX1 -1.33% dropped 1.4% to 3,874.06, and Germany’s DAX 30 index DX:DAX -0.86% fell 0.8% to 8,233.56. Outside the major indexes, shares of Man Group PLC UK:EMG -14.38% sank 14%, after the investment firm said net asset value of its A Man AHL Diversified fund fell 6.1% last week. Additionally, UBS cut the firm to neutral from buy. Royal Ahold NV NL:AH -3.16% dropped 3.1% in Amsterdam, after J.P. Morgan Cazenove cut the food retailer to neutral from overweight. Sara Sjolin is a MarketWatch reporter based in London. Follow her on Twitter @sarasjolin.

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