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European Markets Declined Fueled By Recession Fears

The European markets finished solidly to the downside Wednesday. The release of the minutes of the latest monetary policy meeting of the U.S. Federal Reserve on Tuesday dampened hopes for additional stimulus. A disappointing bond auction in Spain also contributed to the negative mood. Bank stocks and miners in particular were under pressure Wednesday.

The minutes of the Fed's March meeting indicated that only two of the 10 members saw the case for another round of quantitative easing amid signs of improvement in the U.S. economy. The minutes of the January meeting had shown that "a few members" believed conditions could warrant additional securities purchases.

The European Central Bank kept eurozone interest rates unchanged at a record low for the fourth month in a row on Wednesday as the region's economy is likely to have entered a recession in the first quarter amid lingering concerns over the sovereign debt crisis.

Any talk of an exit strategy regarding monetary policy in the euro area is "premature" despite upside risks to inflation, European Central Bank President Mario Draghi said on Wednesday. Speaking at his regular post-decision press conference in Frankfurt, Draghi said the central bank is yet to assess the full impact of its three-year long term refinancing operations (LTROs), which he described as "powerful and complex" measures. Inflation rates are likely to stay above 2 percent in 2012, with upside risks prevailing.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 2.54 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, fell by 1.81 percent.

The CAC 40 of France dropped by 2.74 percent and the DAX of Germany finished lower by 2.84 percent. The FTSE 100 of the U.K. decreased by 2.30 percent and the SMI of Switzerland closed down by 1.47 percent.

In Frankfurt, Daimler fell by 3.09 percent. The carmaker backed its earnings and revenue forecast for fiscal year 2012 after reporting strong vehicle sales for the first quarter.

Credit Suisse upgraded its rating on Hugo Boss to "Neutral" from "Outperform." The stock closed lower by 3.97 percent.

Deutsche Wohnen was downgraded to "Neutral" from "Buy" at UBS. The stock declined by 3.50 percent.

In Paris, Veolia Environnement fell by 5.16 percent on a report that the company may assume sole control of a ferry services operator.

In London, mining stocks were weak. Antofagasta fell by 4.51 percent, Fresnillo declined by 8.50 percent and Kazakhmys dropped by 3.65 percent. Rio Tinto finished lower by 3.51 percent and Evraz fell by 6.85 percent.

Logica lost 5.96 percent after the company announced that Seamus Keating, head of its Benelux operations, has stepped down as a director after thirteen years of service.

BTG climbed by 2.60 percent after the company increased its full year revenue outlook.

London Stock Exchange dipped by 0.75 percent. Barclays raised the stock to "Overweight" from "Equalweight."

In Zurich, Roche declined by 1.19 percent. The company continued its efforts to acquire U.S. company Illumina. Roche sent a letter directly to Illumina shareholders, urging them to accept its recent increased $51 per share bid for the company.

Eurozone retail sales declined again in February after a moderate improvement in January as record unemployment, high inflation and severe austerity measures forced consumers to cut back spending. Retail sales fell 0.1 percent month-on-month in February, following a 1.1 percent rise in January. Sales have now fallen in five of the past six months. Nonetheless, the rate of decline was marginally better than the expected 0.2 percent drop.

Eurozone private sector contracted less than previously estimated in March, a revised report from Markit Economics showed Wednesday. The Composite Output Index, that measures activity in both manufacturing and services, fell to a three-month low of 49.1 in March, but the reading came in above the flash reading of 48.7. The score was 49.3 in February.

Activity in the British service sector increased at a faster pace in March, contrary to economists' forecast for a slowdown, data from a survey by Markit Economics and the Chartered Institute of Purchasing and Supply (CIPS) showed Wednesday. The seasonally adjusted purchasing managers' index (PMI) for the service sector rose to 55.3 in March from 53.8 in February. Economists expected the index to drop to 53.4.

Germany's service sector growth slowed less than initially estimated in March, final data released by Markit Economics and BME showed Wednesday. The seasonally adjusted purchasing managers' index (PMI) for the service sector dropped to 52.1 in March from 52.8 in February, marking the second consecutive decline. The index came in above 51.8 estimated earlier.

Germany's factory orders grew 0.3 percent month-on-month in February, reversing January's 1.8 percent decline, the Federal Ministry of Economy and Technology showed Wednesday. The expansion was much smaller than the 1.5 percent consensus forecast.

Employment in the U.S. private sector saw continued growth in the month of March, according to a report released by payroll processor Automatic Data Processing, Inc. (ADP) on Wednesday, with the job growth coming roughly in line with economist estimates. ADP said employment increased by 209,000 jobs in March following an upwardly revised increase of 230,000 jobs in February. Economists had expected an increase of about 208,000 jobs compared to the addition of 216,000 jobs originally reported for the previous month.

While activity in the U.S. service sector continued to expand in the month of March, the Institute for Supply Management released a report on Wednesday showing that the pace of growth in the sector slowed by more than economists had anticipated. The ISM said its non-manufacturing index fell to 56.0 in March from 57.3 in February, although a reading above 50 indicates continued growth in the service sector. Economists had been expecting the index to edge down to a reading of 57.0.

by RTT Staff Writer

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