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European Markets Declined Thursday On Weak Economic Data

2/21/2013 12:00 PM ET

The European markets finished in the red Thursday following the release of several weaker than expected pieces of economic data. A larger than expected increase in U.S. jobless claims and the unexpected decline in the Philly Fed index also contributed to the negative mood. Thursday's session was also the first opportunity that European investors had to react to the FOMC minutes, which was released after the close yesterday. Investors will be awaiting the results of the Italian elections which will be held over the weekend.

Federal Reserve policy makers say the U.S. economy continues to show modest improvement despite weather-related issues late in 2012, according to the minutes of the Federal Open Market Committee's January meeting.

Following a two-day meeting ending January 30, the Fed vowed it will continue to support the U.S. economy with $85 billion a month in asset purchases until the jobs market shows more substantial improvement.

Members noted that employment continued to increase at a moderate pace, and the unemployment rate, though still high, was lower at the end of the fourth quarter than in the preceding quarter.

Despite the relatively rosy view of the economy, the minutes gave no indication that the Fed has plans to reduce their controversial asset purchases ahead of schedule.

Members had varying opinions on the size and timing of asset buying, but the most recent data on inflation is unlikely to make the Fed reconsider its ultra-easy monetary policy.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 2.28 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 1.36 percent.

The DAX of Germany dropped by 1.88 percent and the CAC 40 of France fell by 2.29 percent. The FTSE 100 of the U.K. decreased by 1.61 percent and the SMI of Switzerland finished lower by 1.58 percent.

In Frankfurt, Commerzbank and Deutsche Bank declined by 2.79 percent and 3.99 percent, respectively.

Insurer Allianz, which reported annual results, fell by 2.78 percent.

Deutsche Boerse finished down by 2.39 percent, following a ratings downgrade at S&P Equity.

Bilfinger Berger dropped by 2.90 percent. UBS downgraded the stock to ''Neutral'' from ''Buy.''

Kloeckner shrugged off ratings downgrades at Citigroup and Commerzbank and gained 3.65 percent.

In Paris, Societe Generale dropped by 4.53 percent. BNP Paribas and Credit Agricole lost 4.55 percent and 4.43 percent.

Axa sank 3.14 percent, after reporting a lower annual profit.

Danone fell by 1.24 percent after Goldman Sachs downgraded the dairy giant to ''Buy'' from ''Conviction Buy.''

Schneider Electric, which reported higher profit, climbed by 2.31 percent.

Cap Gemini and Technip, which also announced financial results, rose by 0.08 percent and 4.29 percent, respectively.

In London, BAE Systems increased by 4.12 percent. The company lifted its dividend, and initiated a three-year share repurchase program of up to 1 billion pounds.

BHP Billiton lost 3.96 percent, after Citigroup downgraded the miner to "Neutral" from "Buy." Kazakhmys declined by 3.44 percent and Anglo American decreased by 1.44 percent. Eurasian Natural Resources dropped by 2.68 percent and Rio Tinto fell by 3.51 percent.

Retailer Kingfisher reported a marginal growth in fourth-quarter revenues. The stock finished lower by 0.04 percent.

Swiss Re gained 2.51 percent in Zurich, after proposing higher dividends.

An indicator of private sector activity in the eurozone pointed to a further decline in business activity in February, denting hopes that the 17-nation economy will emerge from recession in the first months of 2013, despite buoyant financial market performance.

The flash composite output index that measures performance of both manufacturing and service sectors fell unexpectedly to 47.3 in February from a 10-month high of 48.6 in January, preliminary results of a survey by Markit Economics revealed Thursday. The reading was forecast to rise to 49.

Germany's private sector business activity slowed in February, preliminary results of a survey by Markit Economics revealed Thursday. The flash composite output index, that measures performance of both manufacturing and services sectors, fell to 52.7 in February from 54.4 in January.

The French private sector activity decelerated in February to the lowest level since March 2009, survey data from Markit Economics showed Thursday. The flash composite output index fell to 42.3 from 42.7 in January. The steeper fall in overall output was driven by an accelerated decline in the service sector, where activity contracted at the fastest pace in four years.

The U.K. budget surplus increased more than expected in January as the Bank of England transferred GBP 3.8 billion from asset purchase facility to the Treasury. The budget surplus, excluding the temporary effects of financial interventions, came in at GBP 11.4 billion in January, the Office for National Statistics said Thursday. The surplus surpassed the GBP 8.7 billion excess forecast by economists.

The U.K. public sector net borrowing, excluding the temporary effects of financial interventions came in at - GBP 11.4 billion in January, reflecting a repayment, the Office for National Statistics said Thursday. During the same period of last year, repayment was -GBP 6.4 billion.

First-time claims for U.S. unemployment benefits rose by slightly more than expected in the week ended February 16th, according to a report released by the Labor Department on Thursday. The report said initial jobless claims climbed to 362,000, an increase of 20,000 from the previous week's revised figure of 342,000.

Economists had been expecting jobless claims to rise to 359,000 from the 341,000 originally reported for the previous week.

Consumer prices in the U.S. came in essentially unchanged for the second consecutive month in January, the Labor Department revealed in a report released on Thursday. The Labor Department said its consumer price index was unchanged in January after coming in flat in December, while economists had expected the index to inch up by 0.1 percent.

After reporting a notable decrease in U.S. existing home sales for the month of December, the National Association of Realtors released a report on Thursday showing that existing home sales saw a modest rebound in January.

NAR said existing home sales rose 0.4 percent to a seasonally adjusted annual rate of 4.92 million in January after falling 1.2 percent to a downwardly revised 4.90 million in December. The rebound came as a surprise to economists, who had expected existing home sales to dip to an annual rate of 4.90 million from the 4.94 million originally reported for the previous month.

Manufacturers in the Philadelphia region have seen a continued decline in activity in the month of February, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday.

The Philly Fed said its index of current activity fell to a negative 12.5 in February from a negative 5.8 in January, with a negative reading indicating a contraction in regional manufacturing activity. The drop by the Philly Fed index came as a surprise to economists, who had been expecting the index to climb to a positive 1.1.

Pointing to a slow but continued expansion in U.S. economic activity in the near term, the Conference Board released a report on Thursday showing a modest increase by its index of leading U.S. economic indicators in the month of January.

The Conference Board said its leading economic index edged up by 0.2 percent in January following a 0.5 percent increase in December. Economists had expected the index to increase by about 0.3 percent.

by RTT Staff Writer

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