By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets dropped from
multiyear highs on Wednesday as Deutsche Lufthansa and Vallourec
slumped more than 10% after profit warnings.
The Stoxx Europe 600 index gave up 0.6% to 347.63, after closing
at the highest level since January 2008 on Tuesday.
Shares of Deutsche Lufthansa slid 14% after the airline cut its
operating profit forecast for 2014 and said it no longer expects to
achieve its 2015 operating result target. If the stock closes down
at this level, it will mark the worst trading day since September
2001 for Lufthansa.
Meanwhile, Emirates canceled an order for 70 A350 long-range
jets, further sending shivers through the airline sector. Airbus
Group NV lost 3.1% after the announcement. Engine-maker Rolls-Royce
Holdings PLC said its order book will fall about 3.5% because of
the Emirates cancellation, and that sent its shares 4.5% lower.
International Consolidated Airlines Group SA (ICAGY) dropped
3.1%, Air France-KLM SA lost 7% and SAS AB gave up 3%.
Vallourec tumbled 11% on news the steel-pipe maker late Tuesday
cut its full-year guidance for 2014 after large clients delayed
orders until next year. Credit Suisse and Exane BNP Paribas both
cut the company to neutral from outperform, while J.P. Morgan
Cazenove downgraded the stock to underweight from neutral.
Aside from corporate news, investors digested the recent rally
in equities that was spurred by the European Central Bank's
aggressive stimulus measures announced last week. The Stoxx 600 was
at a more than six-year high on Tuesday, Germany's DAX index was
close to a record high and the S&P 500 (SPX) and Dow Jones
Industrial Average (DJI) were hovering around all-time highs, and
there is now concern that the "positive momentum is beginning to
flag," Mike van Dulken, head of research at Accendo Markets, said
in a note.
"That's not to say we necessarily expect a correction, but at
least a sideways move as a pause for breath following recent
gains," he said.
U.S. stocks also traded lower on Wednesday.
World Bank growth downgrade
The World Bank also gave investors food for thought, trimming
its global growth forecast for 2014 to 2.8%, down from its 3.2%
forecast in January. The institution said the harsh winter in the
U.S. and the Ukraine conflict has bruised the outlook for economic
growth globally this year.
In its report, the World Bank also warned of a "hard landing" in
China that could weigh down East Asian countries and hurt commodity
exporters.
Among country-specific indexes in Europe, Germany's DAX 30 index
dropped 0.8% to 9,950.09, while France's CAC 40 index lost 0.8% to
4,556.59.
U.K. labor-market data
The U.K.'s FTSE 100 index fell 0.6% to 6,834.82, as
stronger-than-expected unemployment data added more pressure on the
Bank of England to hike its key lending rate. The U.K. joblessness
level for the three months to April fell to 6.6% from 6.8% in the
three months to March, beating forecasts of a 6.7% reading.
Wage growth, however, slowed markedly in April, with average
salaries including bonuses improving 0.7%, down from 1.9% in March.
Earnings growth have become an increasingly important factor for
the Bank of England after the central bank scrapped its initial
forward guidance that focused mainly on the headline unemployment
rate.
The slow salary increase in April was mostly due to the impact
of a top-bracket income tax change that boosted pay this time last
year, according to analysts.
Outside the major indexes, shares of Banca Monte dei Paschi di
Siena SpA sank 20% as the bank carried on with capital increases
aimed at raising EUR5 billon to avoid nationalization.
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