The European markets finished solidly in negative territory Thursday. Weaker than expected manufacturing data from China and comments made yesterday by Federal Reserve Chairman Ben Bernanke sparked the sell-off. Economic data from Europe was also disappointing. Banks, automakers and mining stocks were among the hardest hit.
In prepared remarks before the Joint Economic Committee of Congress on Wednesday, Bernanke seemed supportive of leaving monetary policy unchanged in the near future. The Fed chief told the committee that a premature tightening of monetary policy carries a substantial risk of slowing or ending the economic recovery.
However, Bernanke later acknowledged that upbeat economic data could lead the Fed to scale back its asset purchase program in the next few meetings.
Further, the minutes of the latest FOMC meeting said a number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting.
China's manufacturing sector contracted for the first time in seven months in May amid poor demand, fueling concerns that the weakness in the economy may persist for some more time. The headline purchasing managers' index, an indicator of the health of the factory sector, fell to a seven-month low of 49.6 in May from 50.4 in April.
Spain's borrowing costs increased at a triple bond sale on Thursday amid a fall in demand among investors. The treasury sold EUR 4.08 billion of bonds maturing in 2016, 2018 and 2026. The 2018 bonds were sold at an average yield of 3.001 percent compared to 2.789 percent at the last issue.
The average yield on 2016 bonds rose to 2.44 percent from 2.24 percent. Meanwhile, the average yield on long-term 2026 bonds increased to 4.5 percent from 4.3 percent.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 2.07 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 1.94 percent.
The DAX of Germany dropped by 2.10 percent and the CAC 40 of France fell by 2.07 percent. The FTSE 100 of the U.K. decreased by 2.10 percent and the SMI of Switzerland lost 2.84 percent.
In Frankfurt, Commerzbank declined by 6.43 percent and Deutsche Bank fell by 3.66 percent.
Daimler dropped by 3.25 percent, Volkswagen lost 2.84 percent and BMW decreased by 2.52 percent.
Morgan Stanley initiated Bayer with an ''Equalweight'' rating. The stock fell by 1.88 percent.
Medical services firm Celesio declined by 4.38 percent. UBS downgraded the stock to ''Sell'' from ''Buy.''
Aixtron fell by 2.68 percent, after announcing a 5-point program to bring the company back to profitability.
Merck finished up by 0.28 percent. Morgan Stanley initiated the stock with an ''Overweight'' rating.
In Paris, Societe Generale, declined by 3.87 percent. Credit Agricole and BNP Paribas fell by 3.21 percent and 2.76 percent respectively.
Carmakers Renault and Peugeot dropped by 3.98 percent and 5.26 percent, respectively Tire manufacturer Michelin fell by 3.71 percent.
Technip, which landed a contract for flare modification in Abu Dhabi, finished down by 1.73 percent.
In London, SAB Miller fell by 2.09 percent. The brewer reported a decline in profit for fiscal 2013, reflecting exceptional gains it enjoyed last year.
ARM Holdings dropped by 5.24 percent, after Exane BNP Paribas downgraded the stock to "Neutral" from "Outperform."
Mining stocks were down on the weak Chinese data. Anglo American declined by 5.05 percent and Antofagasta lost 4.39 percent. Vedanta Resources fell by 3.67 percent and Rio Tinto decreased by 4.26 percent.
Royal Bank of Scotland dropped by 3.55 percent and Barclays fell by 3.71 percent.
Pub and restaurant operator Mitchells & Butlers finished lower by 3.26 percent. The company reported a higher profit for its first half, driven by growth in revenues as well as improved margins. However, it expects consumer confidence and discretionary income growth to remain subdued for some more time.
Thomas Cook decreased by 0.87 percent. Nomura upgraded the stock to ''Neutral'' from ''Reduce.''
United utilities, which announced increased pre-tax profit for the year, finished up by 0.77 percent.
Swiss Life, which reported higher premium income for the first quarter, fell by 2.05 percent in Zurich.
Consumer sentiment in the euro area increased for the sixth consecutive month in May to its strongest level since the middle of last year, preliminary data from the European Commission showed Thursday.
The DG ECFIN flash estimate of the consumer confidence indicator for Eurozone came in at -21.9, up from April's final score of -22.3. Economists were looking for a score of -21.8 for May. The latest reading is the highest since July last year, when the figure was -21.3.
An indicator of Eurozone's private sector activity improved more than expected in May, renewing hopes that the economy is inching towards a recovery. Nonetheless, the indicator remained in negative territory, signaling sharp deterioration in overall business activity.
The composite output index, which measures the performance of the both manufacturing and service sectors, rose to a three-month high of 47.7 in May from 46.9 in April, flash results of a survey by Markit Economics showed Thursday.
Germany's private sector activity improved from a five-month low, but remained marginally below the neutral level, flash survey results from Markit Economics showed Thursday. The composite output index rose to 49.9 in May from a five-month low of 49.2 in April.
The downturn in French private sector output continued in May, flash data from Markit Economics showed Thursday. The composite output index remained unchanged at 44.3 in May.
Germany's leading index continued to climb in March led by the yield spread, stock price index and new orders in investment goods industries components, survey data released by the Conference Board showed on Thursday.
The Conference Board Leading Economic Index for Germany rose 0.3 percent in March to 103.9. The pace of increase was unchanged from February.
The U.K. economy avoided recession in the first quarter as initially estimated, but the detailed breakdown of gross domestic product highlighted major contribution coming only from built up stocks of companies.
Gross domestic product grew 0.3 percent sequentially in the first quarter, offsetting the last quarter's 0.3 percent fall, second estimates from the Office for National Statistics showed Thursday. The figure came in line with the estimate released on April 25.
First-time claims for U.S. unemployment benefits fell by more than expected in the week ended May 18th, according to a report released by the Labor Department on Thursday. The report showed that initial jobless claims fell to 340,000, a decrease of 23,000 from the previous week's revised figure of 363,000.
Economists had expected jobless claims to drop to about 345,000 from the 360,000 originally reported for the previous week.
In another upbeat sign for the U.S. housing market, the Commerce Department released a report on Thursday showing that new home sales came in well above economist estimates in the month of April. The report showed that new home sales climbed 2.3 percent to a seasonally adjusted annual rate of 454,000 in April from the revised March rate of 444,000.
Economists had expected new home sales to rise to an annual rate of 425,000 compared to the 417,000 originally reported for the previous month, reflecting a 1.9 percent increase.
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