By Carla Mozee, MarketWatch
LONDON (MarketWatch)--European equities fell and the euro
languished at two-year lows against the dollar on Wednesday, as
economic data highlighted the growth challenges that the European
Central Bank likely will address at its meeting Thursday.
German's manufacturing sector stagnated in September, with data
firm Markit's manufacturing purchasing managers index falling to
49.9, the first reading below the 50 level since June 2013. A
reading below 50 indicates contraction.
Meanwhile, the eurozone manufacturing PMI slipped to 50.3
compared with a previous estimate of 50.5, Markit said. The French
manufacturing sector contracted last month, but one positive
takeaway from that report was the contraction was at its slowest
pace in four months.
Overall, the near-term outlook looks worrying for the eurozone
manufacturing sector as order books are deteriorating for the first
time since June of last year, "suggesting output could start to
fall as we move into the final quarter of the year," said Markit
Chief Economist Chris Williamson in Wednesday's report.
Markets: The Stoxx Europe 600 fell 0.8% to 340.22. It declined
to intraday lows as trading on Wall Street opened, with U.S. stocks
dropping after a stronger-than-expected report on private-sector
hiring further stoked concerns that the Federal Reserve will raise
interest rates sooner than later.
For much of the European session, investors appeared to stay on
the sidelines before the European Central Bank makes its own policy
announcement on Thursday.
The Financial Times late Tuesday reported ECB President Mario
Draghi will push for Greek and Cypriot bank loans that carry
so-called junk ratings to be included in the ECB's program of
buying covered bonds and asset-backed securities. "That this
proposal is meeting strong resistance within Germany should be no
surprise," said Adam Cole, head of G-10 currency strategy at RBC,
in a note.
The euro (EURUSD) hit an intraday low at $1.2584 against the
dollar after the manufacturing report. The euro later fetched
$1.2605, compared with $1.2631 late Tuesday in New York.
The U.K. FTSE 100 fell 1% as shares of supermarkets Sainsbury
and Tesco were hammered.
The U.K. also received downbeat data from Markit, as Britain's
manufacturing sector in September expanded at the slowest pace in
17 months. The pound (GBPUSD) fell below $1.62 during the session
but bounced back to around late Tuesday's level around $1.6212.
"The strong upsurge in U.K. manufacturing sector at the start of
the year appears to have run its course," said Rob Dobson, Markit
senior economist, in a note. "September's disappointing reading
will therefore add to the air of caution as to whether the [U.K.]
economy is ready for higher interest rates," he said.
Germany's DAX 30 index turned lower by 1% to 9,382.03. Shares of
Adidas AG , however, were higher after the German sports wear
retailer said it would pay as much as 1.5 billion euros ($1.9
billion) back to shareholders by the end of 2017
In France, the CAC 40 lost 1.2% to 4,365.27.
Also Wednesday, the International Monetary Fund halved its 2015
forecast for Russian economic growth, to 0.5% from 1%. Geopolitical
tensions "including sanctions, counter-sanctions, and fear of their
further escalation--are amplifying uncertainty, depressing
confidence and investment," it said. The greenback traded at
39.6606 rubles late Wednesday. The ruble hit fresh lows Tuesday
after a Bloomberg report that Russia's central bank was considering
measures to curb the outflow of money from the country. The central
bank later said it wasn't considering such a move.
Meanwhile, shoe and clothing retailer Zalando SE made its
trading debut on the Frankfurt stock exchange. The shares opened at
EUR24.10 ($30.40), above the EUR21.50 issue price. They finished at
EUR21.57, according to FactSet data.
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