By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets broke a five-day
winning streak on Thursday, following disappointing trading updates
from Zurich Insurance Group AG and Hennes & Mauritz AB.
Additionally, worries that bond buying in the U.S. soon will be
reduced spooked investors after better-than-expected jobless-claims
data.
The Stoxx Europe 600 index slumped 1.1% to close at 305.34,
posting the biggest one-day percentage loss since early July. On
Wednesday, the index closed at its highest level since May 22 after
data showed the euro zone emerged from a six-quarter-long
recession. Read: Euro-zone GDP: Time to pop the champagne?
"It's a correction after the market was close to multiyear
highs. If you look at the performance for European equities since
June, they are up over 10%, so they didn't need very much to
trigger a correction," said James Buckley, fund manager at Baring
Asset Management.
"This may continue for a few days and could give a 5% setback,
but the underlying fundamentals are strong enough to encourage
buyers to come back in after a few days," he added.
"[The markets] are macro driven and we continue to see that
European macro data has bottomed. China is perhaps not suffering
the extent of a slowdown that people were fearing a month or two
ago. This should be positive for earnings looking into 2014 and
that should encourage buyers on any weakness."
Drug makers added the most pressure on the pan-European index on
Thursday after a round of ratings changes. Shares of AstraZeneca
PLC (AZN) lost 1.7% after Morgan Stanley cut the pharma firm to
underweight from equal weight. GlaxoSmithKline PLC (GSK) got the
same treatment, and its shares dropped 1.4%.
Among other notable decliners, shares of Zurich Insurance Group
dropped 3.6% after the company reported a 27% decline in
second-quarter income. The firm said the flooding in Eastern and
Central Europe, and U.S. tornadoes, weighed on earnings.
Hennes & Mauritz gave up 1.6% after the Swedish fashion
retailer posted a 1% fall in comparable sales in July.
U.S. data and tapering fears
The overall negative sentiment in Europe followed weak trading
sessions in Asia and the U.S., with ongoing worries about the
timing and pace of potential reductions in the U.S. Federal
Reserve's bond purchases sending U.S. borrowing costs to 2011
highs.
Further adding to the tapering fears, data Thursday showed
weekly jobless claims in the U.S. fell by 15,000 to 320,000,
hitting the lowest level of initial claims since October 2007, two
months before the Great Recession started. Fed Chairman Ben
Bernanke has said any reduction in bond buying is dependent on
improvements in macroeconomic data, with the labor market seen as
one of the major focal points.
Also on the data front in the U.S., the New York Fed's "Empire
State" general business conditions index fell to 8.2 in August from
9.5 in July, while industrial production was flat in July.
Europe movers
In the U.K., data showed retail sales rose 1.1% in on the month
in July and jumped 3% on the year. Economists had forecast sales to
rise 0.7% on the month and 2.5% on the year.
The data, however, failed to boost the U.K.'s FTSE 100 index ,
which dropped 1.6% to 6,483.34.
Weighing on the index in London, shares of Rio Tinto PLC (RIO)
lost 2.8% after the mining firm said it plans to cut as many as
1,700 jobs after delaying an expansion in Mongolia, according to
The Wall Street Journal.
Germany's DAX 30 index fell 0.7% to 8,376.29, while France's CAC
40 index lost 0.5% to 4,093.20.
Among notable movers, shares of Ophir Energy PLC sank 15% after
the oil- and gas-exploration firm reported a loss in the first half
of the year.
Oriflame Cosmetics SA (ORFLY) lost 6.6% after the Swedish
company reported a drop in second-quarter sales.
On a more upbeat note, shares of Imperial Tobacco Group PLC
(ITYBY) picked up 2.6% after the firm said its performance in the
first nine months of the year was in line with full-year
expectations. Analysts at Credit Suisse said the release "strikes
an upbeat tone on the strategic transition, and the appointment of
a new marketing director (Peter Corjin from P&G) fills a key
gap in senior management."
Subscribe to WSJ: http://online.wsj.com?mod=djnwires