By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- German stocks provided the lone bright
spot in European stocks, where markets broadly fell on downbeat
Europe and U.S. economic data and as investors stepped back ahead
of key central-bank meetings. Deutsche Bank AG, UBS AG and BP PLC
rose on results.
The Stoxx Europe 600 index , set to end the month with a
moderate gain of close to 1%, was off 0.4% to 296.25. The index
closed the prior session with a 0.5% gain as investors welcomed a
new government in Italy.
Decliners outweighed gainers, pressured as U.S. stocks generally
fell and a gauge of manufacturing in the Chicago area dropped to a
more-than-three-year low in April. The Federal Reserve begins its
two-day meeting on Tuesday, with a decision due Wednesday, though
no change in interest rates or in the central bank's
asset-purchasing plan is expected at that meeting.
A clutch of downbeat data also kept Europe pinned down.
Unemployment numbers showed jobless levels higher in the euro zone
than a year ago, and jobless levels also rose in Germany, the euro
zone's economic motor. Market research group GfK reported a
better-than-expected reading on German consumer confidence, though
retail sales slipped.
The data come ahead of Thursday's European Central Bank meeting,
where a growing number of economists are expecting an interest-rate
cut. Peter Garnry, equity strategist at Saxo Bank, said European
markets have shifted lower as investors take profits on recent
gains as that meeting looms.
Garnry said financial stocks stand to gain from any ECB policy
easing, but problems remain. "You still have the credit markets not
functioning well in the sense of small to medium-sized companies
are not getting credit. That part is not working yet, so if they
cut the rate, that won't mean a lot to the real economy.
Banks were among the few bright spots in Europe on Tuesday,
though that wasn't all banks. Shares of UBS (UBS) rose more than 6%
after the Swiss investment bank nearly doubled expectations with a
profit of 988 million Swiss francs, driven by its wealth management
and investment bank units.
Shares of Germany's Deutsche Bank AG (DB) also rose more than 6%
after the bank reported results after the close of markets the
prior day. The financial institution said its first-quarter profit
rose to 1.7 billion euros, or 1.71 euros per share, which exceeded
forecasts. The bank also announced capital-raising measures of
around 2.8 billion euros.
Analysts at J.P. Morgan Cazenove upgraded the investment bank to
overweight from neutral, applauding the fact the bank is "finally
starting to address its capital issues." Nomura lifted Deutsche
Bank to neutral from reduce, saying stronger capital will "end
recent underperformance."
Helped by its heavyweight bank, the German DAX 30 index
outperformed the rest of Europe with a gain of 0.5% to
7,915.76.
Plenty of other banks were faring poorly, such as National Bank
of Greece SA (NBG) , which plunged 20%. A day prior, shareholders
approved a 9.75-billion-euro share offering in a bid to help
restore solvency levels demanded by the country's central bank.
Shares of Anheuser-Busch Inbev NV (AHBIY) fell 2.4% after the
beer group said first-quarter volumes in its Brazil and U.S.
markets fell, as it posted sales that missed expectations.
In London, weaker mining stocks and some banks dragged on the
main index. Analysts say mining stocks have been suffering from a
constant drag in sentiment since February, not helped by supply
surplus and wobbly Chinese data. Among London's heavyweights, BHP
Billiton PLC (BHP) fell 2.7% and Rio Tinto PLC (RIO) lost 2.4%.
BP PLC (BP) rose 2.3% after the oil major reported a
more-than-three-fold rise in profit for the first quarter, lifted
by profits from the sale of its Russian joint venture TNK-BP.
Lloyds Banking Group PLC (LYG) was among the other few bright
spots, lifted by positive results, with those shares up 1.4%. But
the FTSE 100 index fell 0.5% to 6,424.01.
Shares of Centrica PLC fell 2.6% after the utility was cut to
underperform from neutral at Credit Suisse.
Shares of Unilever PLC fell nearly 1%. The group said it will
increase its stake in its India unit, Hindustan Unilever, from
52.48% to 75%.
The French CAC 40 index also weakened, dropping 0.5% to
3,850.94, led by a 1% drop for Sanofi SA (SNY) , which is due to
report first-quarter results May 2.
Italy's FTSE MIB index fell 0.8% to 16,787.72, giving back of
some 2.2% it gained in the prior session on political optimism. In
an interview with Reuters, industry minister Flavio Zanonato said
the new government wants to renegotiate its stability pact with the
European Union.
New Italian Prime Minister Enrico Letta won a confidence vote
the previous day after promising his government will work to change
the pace of Europe's austerity policies, and try to lift his own
country out of recession, according to media reports.
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