Forexpros – European stocks closed lower Thursday, after a flurry of weak data from the euro zone combined with the Feds slow growth forecast and soft U.S. economic numbers to dampen equity sentiment.
At the close of European trade, the EURO STOXX 50 fell 0.37%, France’s CAC 40 gave back 0.39%, while Germany’s DAX 30 plunged 0.77%.
Investor confidence weakened after the Federal Reserve announced Wednesday that it is extending the current bond buying program until the end of the year, disappointing expectations for more aggressive measures, following a recent string of weak U.S. data.
In addition, equity sentiment was hit after data showed that manufacturing activity in the Philadelphia-region contracted at the steepest rate since August this month, adding to concerns over the pace of the U.S. economic recovery.
The Federal Reserve Bank of Philadelphia said that its manufacturing index dropped by 10.8 points to minus 16.6 in June from May’s reading of minus 5.8.
Analysts had expected the index to rise by 7.1 points to 1.3 in June.
A separate report showed that U.S. existing home sales fell more-than-expected in May, falling by 1.5% to a seasonally adjusted 4.55 million units, outstripping expectations for a 1.1% decline to 4.57 million units.
Earlier Thursday, the U.S. Department of Labor said the number of people filing for initial jobless benefits fell by 2,000 to a seasonally adjusted 387,000 last week, disappointing expectations for a decline of 9,000 to 380,000.
The previous week’s figure was revised up to 389,000 from a previously reported 386,000.
In the euro zone, manufacturing activity contracted at the fastest pace since June 2009 this month, while manufacturing activity in Germany slowed to the lowest level in three years in June.
Financial stocks turned broadly higher after Spain’s Treasury sold slightly more than the targeted amount of EUR2 billion at an action of government debt, although borrowing costs rose sharply.
Italian lender Unicredit led gains, up 1.89%, and was closely followed by Spain’s Banco Santander, with shares surging 1.59%, while France’s BNP Paribas and Societe Generale rose 0.88% and 0.22%.
Germany’s two biggest lenders, Deutsche Bank and Commerzbank, were also on the upside, as shares advanced 1.14% and 1.69% respectively.
Spain’s largest phone company Telefonica also erased earlier losses, climbing 0.44%, after Moody’s Investor Service cut its credit rating by one notch to Baa2. Moody’s said the company’s credit rating could be reduced further as Spanish consumers are currently scaling back spending and as the government’s credit profile worsens.
Cyclical stocks remained broadly lower however, weighed by disappointing manufacturing activity data from China, showing a contraction for the eighth straight month. France-based steel company ArcelorMittal saw shares tumble 1.77%, while energy companies continued to tumble, led by Spain’s Repsol, down 3.41%.
Mining giants Rio Tinto and Bhp Billiton dropped 0.78% and 1.47% respectively, while Glencore saw shares plunge 2.54%. Copper producers also remained broadly lower, with Xstrata and Kazakhmys plummeting 2.27% and 1.52%.
Oil and gas major Anglo American was also one of the session’s top losers, plunging 2.34%, while BP saw shares slump 2.14%.
Elsewhere, shares in Invensys sank 16.38% after British engineer said that preliminary discussions about a takeover with third parties including Emerson Electric had ended with no offer.
Meanwhile, U.K. lenders erased losses, tracking their European counterparts higher. Shares in Lloyds Banking surged 1.92% and the Royal Bank of Scotland climbed 0.59%, while Barclays added 0.41%.
In the U.S., equity markets, the Dow trades down 1.16%, the S&P 500 gave back 1.26% and the tech heavy Nasdaq fell 1.42%
Investors also remained cautious ahead to the outcome of an audit of Spanish banks later in the day, amid concerns that the results could show that a EUR100 billion bailout for the country’s banks agreed earlier this month would not be large enough.
Later in the day, European Central Bank head Mario Draghi was to speak. Investores are anticipating German IFO Business Climate Index and the Canadian core CPI on Friday.