By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets slumped on
Thursday, as investors worried about the outlook for weakening
growth in China and as downbeat earnings from some of region's
major companies soured the mood.
A pickup in the U.K. economy also failed to boost sentiment.
The Stoxx Europe 600 index dropped 0.7% to 299.19, pulling back
from its highest closing level since late May, reached on
Wednesday.
Shares of Orange lost 4.3% after the French telecom firm
reported a 38% fall in first-half income on the back of fierce
price competition in the home market.
Chemicals major BASF SE gave up 3.9% after reporting
second-quarter earnings below expectations.
Shares of Michelin shaved off 1.5% after the tire maker said
first-half profit slid 45% and that it's taking a 250 million-euro
($330 million) restructuring charge related to boosting
manufacturing efficiency.
China growth worries
The broader European stock market lost momentum as investors
worried about the potential for lower growth in China. On
Wednesday, the HSBC preliminary Chinese manufacturing Purchasing
Managers' Index dropped to an 11-month low, following recent
indications from politicians that the government would be willing
to accept a lower growth rate.
Late on Wednesday, Beijing unveiled new stimulus measures
targeting small businesses, but the small size of the package
indicated that China isn't aiming at boosting growth, but rather
focused on meeting its target, analysts said.
"We've seen this continued news flow from China over recent days
with several indications that China is happy to settle on a lower
growth path, maybe even lower than 7%. But we also had indications
that they would shore up small businesses and export firms and the
uncertainty about what the policy is leaves a question mark over
China," said Victoria Clarke, economist at Investec Securities.
"This uncertainty against the backdrop of fairly thin markets as
we head into the summer is one of the main factors driving the
market down," she added.
Data out of the euro zone showed loans to the private sector
weakened to -1.6% in June from -1.1% in May, while the M3 measure
of money supply slipped to 2.3 from 2.9.
U.K. GDP growth
Investors were also eyeing data out of the U.K., with the first
estimate of second-quarter gross domestic product coming in at 0.6%
quarterly growth, in line with expectations.
"This was effectively priced into the market, but it doesn't
change the fact that GDP is still 3.3% below its precrisis peak and
it's in that context the figures are being assessed. It's about
pushing the U.K. to a stronger, sustainable recovery position and
we're not there yet," Clarke added.
The FTSE 100 index dropped 0.5% to 6,585.15.
Shares of Unilever PLC (UN) (UL) shaved off 1.6% after the
consumer-products firm warned economic conditions remained
difficult throughout its markets.
Shares of Rolls-Royce Holdings PLC jumped 4.7% in London after
the engine maker said pretax profit climbed 34% on an underlying
basis and backed its prior full-year guidance.
In Germany, the Ifo business confidence index rose to 106.2 in
July from 105.9 in June, beating economists' forecasts for a 106.0
reading and rising further above its long-term average of 101.
Business expectations, however, weakened slightly.
The report came after data from Markit on Wednesday signaled a
solid rebound in the German private sector, driven by faster rates
of expansion in both manufacturing and services. The composite PMI
for the country jumped to a five-month high of 52.8 in July, the
data showed.
On Thursday, however, the DAX 30 index lost 1.1% to 8,289.50,
weighed by BASF shares. Commerzbank AG was also lower, off 2.3%,
and Deutsche Bank AG (DB) lost 0.5%.
Outside the main index on Frankfurt, shares of Axel Springer AG
soared 21% after the publisher said it will sell its regional
newspapers, television-program guides and women's magazines in a
EUR920 million deal.
And in France, the CAC 40 index eased 0.4% to 3,946.11, with
Orange and Michelin among decliners.
Outside the major indexes, shares of ABB Ltd. slumped 3.6% after
the power and technology firm reported second-quarter earnings that
fell short of expectations. Profit rose 16% to $763 million, short
of forecasts of $804 million.
On a more upbeat note, shares of Roche Holding AG (RHHBY) picked
up 1.2% after the drug maker said first-half profit surged nearly
40% on the back of solid sales of key cancer drugs.
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