UKX FTSE 100 Index

By Sara Sjolin, MarketWatch

But Stoxx 600 stays on track for 2.3% weekly gain

European stocks moved decisively lower on Friday, giving back a chunk of the previous day's rally after the latest round of economic data painted a mixed picture of the region's recovery.

The Stoxx Europe 600 index slumped 0.8% to 344.98, partly erasing a 1.6% advance from Thursday that saw the benchmark close at its highest level since Sept. 8.

For the week, the Stoxx 600 is still eyeing a 2.1% advance, its biggest since mid-July.

Thursday's rally (http://www.marketwatch.com/story/european-stocks-climb-as-fed-inspires-risk-taking-2016-09-22) came after the U.S. Federal Reserve refrained from raising interest rates and indicated it would keep monetary policy loose for at least another few months. Traders in Europe and the U.K. closely watch where U.S. interest rates are headed, as they are a major driver for the global economy and currency markets.

PMIs in the frame: However, on Friday the optimism fizzled, partly due to a disappointing reading in the purchasing managers index for September (http://www.marketwatch.com/story/french-revival-lifts-eurozone-pmi-germany-falters-2016-09-23), which indicated the pace of growth for private-sector activity in the region slowed. The eurozone flash composite PMI dropped to a 20-month low of 52.6, missing forecasts of a 52.8 print. A reading of more than 50 indicates an expansion in private-sector activity.

"It is apparent that [the] eurozone is currently finding it a real struggle to break out of lackluster growth, even if there is little evidence that the U.K.'s Brexit vote in June has had a significant dampening influence," said Howard Archer, chief U.K. and European economist at IHS Global Insight.

"We suspect eurozone economic activity could be increasingly hampered by political uncertainty over the coming months, with elections due in 2017 in France and Germany, Spain facing a third general election before long, and the Renzi government looking vulnerable in Italy," he said.

A bright spot in the PMI readings was France, where the composite PMI climbed to a 15-month high. In Germany, however, activity in the services sector disappointed, taking the composite reading to a 16-month low.

Germany's DAX 30 index was down 0.4% at 10,634.34, while France's CAC 40 index dropped 0.6% to 4,481.01.

The euro traded at $1.1212, up from $1.1209 recorded late Thursday in New York.

The U.K.'s FTSE 100 index was off 0.2% (http://www.marketwatch.com/story/uk-stocks-pull-back-led-lower-by-drops-for-miners-2016-09-23) at 6,897.35.

Movers: Shares of Sports Direct International PLC (SPD.LN) jumped 4.2% on the FTSE 250 after the company said founder and major shareholder Mike Ashley is taking over as chief executive (http://www.marketwatch.com/story/sports-direct-shares-rally-as-founder-mike-ashley-takes-over-as-ceo-2016-09-23) with immediate effect. The management change comes after the shock resignation of longtime chief executive Dave Forsey.

Leading decliners in Europe, Indivior PLC (INDV.LN) slumped 10% after news that 35 U.S. states are now backing a lawsuit against the British pharmaceutical company for allegedly anticompetitive behavior.

RWE AG (RWE.XE) dropped 1% after the German utility company's renewable energy unit Innogy SE said shares worth up to about EUR5 billion (http://www.marketwatch.com/story/rwes-renewables-unit-eyes-56-billion-share-sale-2016-09-23) ($5.6 billion) will be offered in its initial public offering.

Banks were also posting big losses, with shares of Popular Espanol SA (POP.MC) down 4%, Royal Bank of Scotland Group PLC (RBS.LN) (RBS.LN) off 2.3% and Deutsche Bank AG (DBK.XE) 2.1% lower.

Commerzbank AG (CBK.XE) slipped 0.4%. The German lender is eyeing at least 5,000 job cuts as part of a broader overhaul (http://www.marketwatch.com/story/commerzbank-eyes-at-least-5000-job-cuts-sources-2016-09-23) to address weak profitability in a world of low interest rates and lackluster client activity, according to people familiar with the plan.

On the sidelines: European Central Bank Vice President Vítor Constâncio said at a conference in Frankfurt on Friday that the policy makers are aware that low interest rates over a longer period could threaten financial stability (http://uk.reuters.com/article/uk-ecb-policy-constancio-idUKKCN11T0LX), Reuters reported.

His comments follow a speech by ECB President Mario Draghi on Thursday, who warned overcapacity in the banking sector is eroding profits (http://www.marketwatch.com/story/ecbs-draghi-warns-crowded-banking-sector-is-squashing-profits-2016-09-22).

Boris Johnson said Thursday he expects the U.K. to formally begin its exit (http://www.marketwatch.com/story/uk-aims-to-start-brexit-talks-in-early-2017-says-boris-johnson-2016-09-23) from the European Union in the early months of next year, speaking to Sky News. Britain's foreign minister also said he doesn't think the U.K. government will need the full two-year window for the Brexit negotiations.

(END) Dow Jones Newswires

September 23, 2016 09:16 ET (13:16 GMT)

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