By Barbara Kollmeyer
MADRID (MarketWatch) -- European stock markets finished lower on
Tuesday, led by resource stocks, which dropped after a surprise
rate hike by China. Tech stocks and U.S. earnings news also weighed
on sentiment.
The Europe Stoxx 600 index fell 0.5% to end at 265.24. Losses
picked up as U.S. stock markets opened in the red, dragged down by
disappointment over earnings from Apple Inc. and International
Business Machines. News of a 0.3% rise in U.S. housing starts in
September, stronger than economists expected and the highest level
since April, did little to stem the selling.
Also weighing was a quarter-point hike in China's deposit and
lending rates that was not expected until early next year.
"If you're tightening the belt, it's the same as saying
inflation is too high and activity is too high," said Christian
Tegllund Blaabjerg, chief equity strategist at Saxo Bank. "You want
to dampen things before they get overheated. Resource stocks are
the first to get hit."
"It is good news for the U.S., though, because it's a de-facto
appreciation of the Chinese currency, even though it's a small
one," he said.
Resources fell on the news that any attempt by China to slow
growth means it won't be buying as many raw materials to fuel that
growth. The news hit both the Australian and New Zealand dollars,
with both countries heavily involved in commodities exports.
December gold futures sank fast, falling $34 to $1,338.50 an
ounce, while November crude-oil futures dropped $2 to $81.10 a
barrel.
China news drubbed resource stocks in Europe.
In London, miners such as Xstrata PLC fell 4.4%. Earlier in the
day the company reported a fall in coal output.
Fresnillo PLC slid 5.3%, Vedanta Resources PLC lost 3.5% and Rio
Tinto (RIO) dropped 3.2%.
The FTSE 100 index fell 0.7% to 5,703.89.
Also in London, shares of ARM Holdings PLC fell 2.6%. Tech
giants Apple (AAPL) and IBM (IBM) posted better-than-forecast
results on Monday, but Apple disappointed investors with its
outlook and iPad sales, while for IBM the focus was on a fall in
new contracts.
However, Autonomy Corp. gained 1.8%. The company said
third-quarter profit rose 22% on a sales increase of 9.9%. Autonomy
sees "upside" to the current market consensus for 2011
earnings.
In Paris, the CAC 40 index fell 0.7% to 3,807.17, with shares of
oil major Total SA (TOT) off 1.7% and tech stocks also weak, with
Capgemini down 2.1% and Alcatel-Lucent off 3.5%.
Some banks stuck to gains, amid a wave of U.S. earnings from
companies including Goldman Sachs Group (GS) and Bank of America
(BAC). Goldman topped expectations for earnings per share, while
Bank of America's loss widened.
Banks were drawing additional support after the Basel Committee
on Banking Supervision said it will let major European banks comply
with new rules on liquidity gradually over an "observation"
period.
In Paris, shares of Societe Generale SA rose 1.7% and Natixis SA
added 2.5%.
Shares of Royal Bank of Scotland Group PLC (RBS) rose 1.4%.
In Germany, Deutsche Bank (DB) rose 1.8% and Commerzbank was up
1.1%.
Shares of Munich Re gained 0.8% on news that Warren Buffett's
Berkshire Hathaway Inc. (BRKA) lifted its stake in the reinsurer to
more than 10% and said it would buy more shares over the next
year.
Weighing on the downside in Germany, Infineon Technologies AG
fell 1.9% and SAP AG (SAP) lost 1.1%.
The German DAX 30 index ended down 0.4% to 6,490.69.
On the economic side, Germany's ZEW investor-sentiment indicator
fell slightly more than forecast in October, to -7.2 from -4.3 in
September.
Blaabjerg said those numbers surprised him a bit. "Sentiment is
moving in the wrong direction. I've been saying for a long time
that you should look for Germany if you want to have a clue on
where Europe is going," he said, adding that Germany is probably
the only country holding up Europe right now.