The European markets finished in negative territory Thursday, due in large part to a weak performance by bank stocks. Concerns over the political situation in Greece and reports of what sounded like a run on Spanish banks dominated the trading session. The markets extended their losses in the afternoon, following the weaker than expected economic results reported by the U.S. The markets of several countries were closed today, due to the Ascension Day holiday.
Greece remained in focus after yesterday's announcement that the country will hold new elections on June 17. The European Central Bank has reportedly halted monetary policy operations to some Greek lenders to restrict its risk.
The weakness in European bank stocks was sparked by a sharp sell-off in shares of Spanish bank Bankia. A local newspaper reported that customers were urgently withdrawing their funds, following the recent nationalization of the bank. There was also speculation that a downgrade of the banking sector by ratings agency Moody's may be forthcoming.
Concerns over a deepening recession and weakness in the banking sector coupled with fears about Greece exiting the euro area triggered a sharp increase in Spain's borrowing costs at a short-term debt auction held on Thursday, which also saw improved demand for the nation's debt.
Nonetheless, the Spanish Treasury said it successfully met the maximum target and the demand for bonds marked a notable improvement. The country sold EUR 2.5 billion, near the top end of the target range of EUR 1.5 billion to EUR 2.5 billion.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 1.16 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 1.00 percent.
The DAX of Germany fell by 1.18 percent and the CAC 40 of France finished lower by 1.20 percent. The FTSE 100 of the U.K. dropped by 1.24 percent. The SMI of Switzerland was closed.
In Frankfurt, GfK declined by 1.36 percent. JPMorgan downgraded its rating on the stock to "Neutral" from "Overweight."
Commerzbank dropped by 1.62 percent and Deutsche Bank closed down by 1.72 percent.
In Paris, Societe Generale finished lower by 3.40 percent. BNP Paribas lost 4.07 percent and Credit Agricole decreased by 3.35 percent.
In London, Invensys closed higher by 3.42 percent. The engineering company reported a decline in fiscal year 2012 profit, hurt mainly by additional costs from its nuclear projects in China.
Vedanta dropped by 4.00 percent, after reporting a lower annual profit.
Aviva declined by 4.59 percent. The company reported a 5 percent drop in quarterly long-term savings sales due to tough market conditions.
HSBC closed down by 2.49 percent. The company expects its cost savings to touch the top end of its target by the end of next year.
Royal Bank of Scotland fell by 3.75 percent and Standard Chartered decreased by 3.37 percent. Barclays lost 3.44 percent and Lloyds Banking Group declined by 3.26 percent.
Cookson surged by 5.52 percent. The company's board has initiated a strategic review and would consider a number of options for the group. These options include a potential demerger or separation of Cookson's main divisions.
The Spanish economy returned to recession in the first quarter of 2012, final results from the statistical office Ine confirmed Thursday. The gross domestic product fell 0.3 percent quarter-on-quarter in the first quarter as estimated in the preliminary report. This followed a similar rate of contraction in the fourth quarter of 2011, which was the first decline in activity since the final three months of 2009.
New claims for U.S. unemployment benefits unexpectedly came in unchanged in the week ended May 12th, according to figures released by the Labor Department on Thursday. Labor Department figures put the level of new unemployment claims at a seasonally adjusted level of 370,000 for the week, unchanged from the previous week's revised figure. Economists had expected jobless claims to edge down to 365,000 from the 367,000 originally reported for the previous week.
Activity in the Philadelphia-area manufacturing sector unexpectedly contracted in the month of May, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday, with the index of activity in the sector turning negative for the first time in eight months.
The Philly Fed said its diffusion index of current activity tumbled to a negative 5.8 in May from a positive 8.5 in April, with a negative reading indicating a contraction in regional manufacturing activity. The drop surprised economists, who had expected the index to climb to a reading of 10.0.
After rising for six consecutive months, the Conference Board's leading economic index unexpectedly showed a modest decrease in the month of April. The Conference Board said Thursday its leading economic index edged down by 0.1 percent in April following a 0.3 percent increase in March. Economists had expected the index to inch up by 0.1 percent.
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