By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets dropped on
Tuesday, after weaker-than-expected German investor confidence data
offset a surprisingly strong reading on euro-zone industrial
production.
The Stoxx Europe 600 index lost 0.4% to 303.43, adding to a 0.2%
drop from Monday, when the index snapped a four-day winning
streak.
Shares of Severn Trent PLC soared 15%, after the water-utility
firm said it received a "very early stage" bid approach, although
no proposal has been made.
Deutsche Post AG gained 2.6%, after the company reported a rise
in first-quarter adjusted profit of more than 45%.
Investors were also looking at economic data in Germany, where
the ZEW economic sentiment indicator, a gauge of investor
confidence, inched 0.1 point higher to 36.4 in May, but still well
below the 40 print expected by analysts. The reading comes after
the index slumped to 36.3 in April, stoking worries about Germany's
economic performance and the country's ability to pull the rest of
Europe of sluggish growth.
"Despite mostly positive economic data for the German economy,
the ZEW Indicator remains at the level of the previous month. This
may be due to the still poor economic situation in the euro zone,
that is also reflected by the recent ECB interest rate cut", said
ZEW President Clemens Fuest, in the release.
German trade data and industrial-production figures released
last week beat market expectations, fueling hopes the economy is
picking up after a soft patch earlier in the year.
Meanwhile, industrial production in the euro zone climbed 1% in
March compared with February, helped by a solid rise in energy
production and durable consumer goods. Analysts expected a rise
around 0.4%.
"The increase in IP over the past two months represents the
first back-to-back gains in output since July/August last year.
This set of data is, therefore, an encouraging sign of a possible
stabilization in output," James Ashley, senior European economist
at RBC Capital Markets, said in a note.
"However, we caution that the details of the report are a little
more mixed than the headlines might suggest, with much of the
strength on the month coming from the (erratic) energy sector," he
added.
The report came a day ahead of the first estimate of economic
growth in the euro zone for the first quarter, with most analysts
expecting to see the region remaining in contraction.
The DAX 30 index dropped 0.2% to 8,264.98 in Tuesday's trade,
retreating from an all-time high reached on Monday.
Banks were posting the biggest losses in Germany, with
Commerzbank AG down 3.4%, after announcing a 2.5 billion euros
($3.25 billion) capital increase to repay German state aid and
boost the bank's equity capital. The price of the new shares will
be EUR4.5 a share, a 55% discount to Monday's closing price.
Deutsche Bank AG (DB) gave up 1.3%.
In France, European Aeronautic Defence & Space Co. rose
2.2%, after the firm kept its earnings guidance for 2013, but
reiterated that the Airbus A350XWB long-range aircraft program
remains "challenging."
The CAC 40 index , however, dropped 0.4% to 3,927.96.
The U.K.'s FTSE 100 index fell 0.1% to 6,623.73, on track to
break an eight-day winning streak.
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