Europe stocks on edge as Spain releases bank audit
LONDON (MarketWatch) -- European shares closed lower on Thursday following a disappointing batch of U.S. economic data and ahead of a closely watched independent audit of Spain's banking sector.
The Stoxx Europe 600 index (SXXP) closed 0.5% lower at 248.40, snapping a four-day winning streak.
Investors in Europe were kept on edge up until the market close in anticipation of the audit of Spain's troubled banks. The assessment showed that the nation's banks may need between 16 billion euros ($20 billion) and €62 billion to recapitalize.Audit of Spanish banks released
Spanish stocks were pulled in opposite directions ahead of the audit, but spent most of the day in positive territory after the Spanish government succeeded in selling €2.2 billion of bonds of various maturities, exceeding its target range of €1 billion to €2 billion. Spain's borrowing costs rise at bond auction
Yields on 10-year Spanish government bonds (10YR_ESP) were lower by 16 basis points at 6.57% in the secondary market, according to electronic trading platform Tradeweb. A basis point is 1/100 of a percentage point.
The IBEX 35 index (IBEX) ended the highly volatile session 0.3% lower at 6,773.50, after trading as high as 6,914.90 earlier in the day. However, most banks still ended higher, with
"Not surprisingly, most of the stocks that have shown the biggest jumps have also been the most heavily shorted so [there's] definitely a feeling of not wanting to be caught out," said David Gualtieri, director of equity sales at Intermoney Valores in Madrid, in emailed comments.
U.S. data
The broader European stock market struggled for direction for most of the session, but was sent lower in afternoon action after the Philadelphia Fed Index showed a sharp decline in June for manufacturing activity in the region. It hit the lowest level since August 2011. Philly factory activity contracts sharply in June
Existing home sales also disappointed, down 1.5% in May. Sales of U.S. existing homes fall 1.5% in May
Meanwhile, jobless claims from the U.S. nudged down by 2,000 to 387,000 last week. U.S. jobless claims barely changed in latest week
U.S. stock were lower on Wall Street. Market snapshot
"People are looking at the U.S. as some kind of engine for the global recovery, so how [the U.S. economy is] growing is important for European markets. Any kind of signs that the U.S. is growing will provide growth for risk assets," said Oliver Wallin, investment director at Octopus Investments.
European stocks also reacted to news from the prior day that the U.S. Federal Reserve failed to meet market hopes when it didn't announce another round of quantitative easing in its policy announcement Wednesday. Fed continues 'Twist'; Bernanke hints at more
"Investors were building themselves up in anticipation ahead of the announcement, but were setting themselves up for a disappointment. They didn't get QE as it wanted," Wallin said.
Anticipation for further central-bank action in Europe, particularly from the Bank of England and the European Central Bank, could spur another short-term rally, he said, although it could be short-lived.
Among data releases in Europe, the composite purchasing managers index for the euro zone in June was unchanged from May's 35-month low, according to a preliminary reading from Markit. June euro-zone PMI stays at 35-month low
Resources weight on FTSE 100
The FTSE 100 index (UKX) closed 1% lower at 5,566.36, as resource firms weighed in the wake of further weakening in Chinese business activity, as a preliminary reading of HSBC's purchasing index dropped to a seven-month low in June. China manufacturing weakens further in June: HSBC
Oil producers also retreated as crude oil inched below $80 a barrel.
Meanwhile, news reports said that major U.K. banks were poised for a downgrade by Moody's Investors Service later in the evening.
In France, banks also weighed, helping push the CAC 40 index (PX1) 0.4% lower to 3,114.22. Société Générale SA (GLE) shed 1.3% and
German stocks were lower, with
Elsewhere, Royal KPN NV (KPN) dropped 5.3% after UBS downgraded the stock to neutral from buy.
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