By Barbara Kollmeyer
MADRID (MarketWatch) -- European stock markets fell on Tuesday,
with nearly all sectors in the red by the afternoon, and led lower
by resource stocks, which fell after a surprise rate hike by China.
Tech stocks and U.S. earnings news also weighed on bourses in the
region.
The Europe Stoxx 600 index fell 0.5% to 265.19, after a rise of
0.3% on Monday. Losses picked up as U.S. stock markets opened in
the red, dragged down by disappointment over earnings from Apple
Inc. and International Business Machines. News of a 0.3% gain in
U.S. housing starts in September, stronger than economists expected
and the highest level since April, did little to stem the
selling.
Also weighing was a quarter-point hike in China's deposit and
lending rates that was not expected until early next year.
"If you're tightening the belt, it's the same as saying
inflation is too high and activity is too high," said Christian
Tegllund Blaabjerg, chief equity strategist at Saxo Bank. "You want
to dampen things before they get overheated. Resource stocks are
the first to get hit."
"It is good news for the U.S., though, because it's a de-facto
appreciation of the Chinese currency, even though it's a small
one," he said.
Resources fell on the news that any attempt by China to slow
growth means it won't be buying as many raw materials to fuel that
growth. The news hit both the Australian and New Zealand dollars,
with both countries heavily involved in commodities exports.
December gold futures sank fast, falling $34 to $1,338.50 an
ounce, while November crude-oil futures dropped $2 to $81.10 a
barrel.
China news drubbed resource stocks in Europe.
In London, miners such as Xstrata PLC fell 5.1%. Earlier in the
day the company reported a fall in coal output. Fresnillo PLC slid
4.6%, Vedanta Resources PLC lost 3.4% and Rio Tinto (RIO) fell
3.2%.
The FTSE 100 index fell 0.7% to 5,700.32.
Also weighing on the downside in London, shares of ARM Holdings
PLC fell 2.8%. Tech giants Apple (AAPL) and IBM (IBM) posted
better-than-forecast results on Monday, but Apple disappointed over
its outlook and iPad sales, while for IBM the focus was on a fall
in new contracts.
However, Autonomy Corp. rose 2.2%. The company said
third-quarter profit rose 22% on a sales gain of 9.9%. Autonomy
sees "upside" to the current market consensus for 2011
earnings.
In Paris, the CAC 40 index fell 0.8% to 3,804.11, with shares of
Total SA (TOT) off 2% and tech stocks also weak, with Capgemini
down 2.1% and Alcatel-Lucent off 4.1%.
Some banks stuck to gains, amid a wave of key U.S. earnings,
such as Goldman Sachs (GS) and Bank of America (BAC). Goldman
topped expectations for earnings per share, while Bank of America's
loss widened.
Banks were drawing additional support after the Basel Committee
on Banking Supervision said it will let major European banks comply
with new rules on liquidity gradually over an "observation"
period.
In Paris, shares of Societe Generale SA rose 1.3% and Natixis SA
added 1.6%.
On the upside, shares of Royal Bank of Scotland (RBS) rose
1%.
In Germany, Deutsche Bank (DB) rose 1.8% and Commerzbank was up
1%.
Shares of Munich Re gained nearly 0.7% on news that Warren
Buffett's Berkshire Hathaway Inc. (BRKA) lifted its stake in the
reinsurer to more than 10% and said it would buy more shares over
the next year.
Weighing on the downside in Germany, Infineon Technologies AG
fell 2.1% and SAP AG (SAP) lost 1.3%. The German DAX 30 index was
off 0.3% to 6,495.39.
On the economic side, the ZEW German investor sentiment
indicator fell slightly more than forecast in October, to -7.2 from
-4.3 in September. ZEW said another decline for economic sentiment
shows that growth will likely slow in the next six months.
Blaabjerg said those numbers surprised him a bit. "Sentiment is
moving in the wrong direction. I've been saying for a long time
that you should look for Germany if you want to have a clue on
where Europe is going," he said, adding that Germany is probably
the only country holding up Europe right now.