By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets trimmed earlier
sharp losses in afternoon action on Wednesday, helped by talks that
the U.S. is closing in on a budget deal, in a move that could avoid
another government shutdown next year.
Equities traded with sharp losses earlier in the day after
better-than-expected U.S. labor data added to fears that the
Federal Reserve could soon start tapering its asset purchases, but
a worse-than-expected reading on the services sector helped to
calmed those jitters.
The Stoxx Europe 600 index dropped 0.6% to close at 317.24,
marking a fourth straight day of losses.
Among notable movers, shares of Sage Group PLC rallied 7.3%
after the software firm raised its dividend by 6% and said it is on
track to meet its organic revenue-growth target in 2015.
Banks posted losses after European Union regulators fined a
group of eight financial institutions a record-breaking penalty of
1.71 billion euros ($2.32 billion) for interest-rate fixing. Among
fined banks, Deutsche Bank AG (DB) lost 1% and Société Générale SA
fell 1%.
Shares of Standard Chartered PLC slid 6.5% in London after the
bank said difficult market conditions are expected the rest of the
year and that income for 2013 will be broadly flat on 2012.
Taper fears
More broadly, investors were hesitant of buying new stocks,
fearing the U.S. Federal Reserve soon will begin to reduce its
$85-billion-a-month asset purchases. The ADP job report showed on
Wednesday that private-sector employers added a
stronger-than-expected 215,000 jobs to the economy in November,
further fueling speculation whether the Fed will start tapering
already at its December meeting. The data came ahead of the highly
anticipated nonfarm-payrolls report on Friday, expected to show
180,000 new jobs were added to the economy in November.
"The main issue for the market remains the job report on Friday
and there are fears we might get a strong reading, but I'm not so
worried about that. The job report has to be extremely strong to
get the Fed to move in December. I think it has to be at least
250,000 before it'll do something," said Philippe Gijsels, head of
research at BNP Paribas Fortis Global Markets.
"Once the markets see the figures are in line [with
expectations], they should go higher...We still have lower interest
rates and it's way too early to go negative," he added.
Markets started paring losses in afternoon action on Wednesday
after the Institute for Supply Management services' index
unexpectedly fell in November, with investors hoping it will weaken
the Fed's tapering argument. Meanwhile, a Bloomberg report said
U.S. budget negotiators were nearing a deal, which could prevent
another government shutdown. U.S. stocks traded higher on Wall
Street after opening in mildly lower territory.
Europe events
Events in Europe also had the potential to be market moving
later in the week. On Thursday, the European Central Bank and the
Bank of England announce their latest monetary-policy decisions,
with market participants particularly paying attention to the
former for clues on tools to stave off low inflation.
Data out on Wednesday showed retail sales weakened 0.2% in
October in the euro zone, while economic growth in the region was
confirmed at 0.1% in the third quarter.
Germany's DAX 30 index dropped 0.9% to 9,140.63, even as
Deutsche Bank lifted its 2014 year-end target for the benchmark to
11,000 from a previous forecast of 9,700, implying a 20% upside
from Wednesday's closing price.
The U.K.'s FTSE 100 index gave up 0.3% to 6,509.97 and France's
CAC 40 index lost 0.6% to 4,148.52.
Shares of Tesco PLC fell 0.5% in London after the supermarkets
chain said it is performing in line with market expectations, but
that same-store sales declined in the U.K. in the third
quarter.
Reckitt Benckiser Group PLC slipped 1% after UBS cut the
consumer-products firm to sell from buy. The analysts said they see
low earnings growth until 2015.
Peugeot SA gained 5.3% in Paris after Goldman Sachs added the
car maker to its conviction buy list.
Also in France, Accor SA climbed 3.1% after UBS lifted the hotel
operator to buy from neutral.
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