By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- German stocks slumped in a weak European
market on Wednesday, as the country's benchmark index dropped close
to key technical levels, after speculation of a sovereign
downgrade.
The broader market was on track for a fourth straight day of
losses, with heavyweight Tesco PLC posting steep losses after a
lackluster earnings report.
The Stoxx Europe 600 index fell 1.2% to 284.85, after closing at
a one-week low on Tuesday.
The index spent the past three sessions mired in the red, as
worries over a slowdown in global growth resurfaced after
disappointing data from China and the U.S.
"The rot may have been stemmed in the short term by positive
[quantitative-easing] comments from some senior Fed officials but
there is a real sense that investors are starting to grow weary as
underlying economic data continues to disappoint," said Mike
McCudden, head of derivatives at Interactive Investor, in a
note.
"Without much by way of fresh data to direct investors today
markets may drift as they look with caution towards another Spanish
bond auction tomorrow and weekly jobs data from the U.S.," he
added.
German stocks were among hardest hit in Europe, as speculation
that the country is facing a sovereign downgrade added to fears in
an already sensitive market.
The DAX 30 index lost 1.9% to 7,538.29, with shares of BASF SE
down 2.8%, after Nomura cut the chemicals firm to neutral from
buy.
"The price of the high euro and the lack of global growth seems
the be hitting where it should: Europe's biggest export economy, so
in short this is like gold--a move towards reality," Steen
Jakobsen, chief economist at Saxo Bank in Copenhagen, said in a
note.
The earnings calender in Europe featured some U.K. heavyweights,
with supermarket retailer Tesco (TESO) reporting its first drop in
earnings in 19 years, as write-downs wiped out much of the profit.
Shares were down 3.2%.
Heavyweight mining firm BHP Billiton PLC (BHP) dropped 2.5%,
after saying iron-ore production was 5% lower in third quarter
compared to the prior quarter.
On a more upbeat earnings note, shares of Burberry Group PLC
(BURBY) jumped 3.6%. The luxury retailer reported a rise in
second-half comparable sales, helped by strong sales in outerwear
and men's clothing.
The FTSE 100 index dropped 0.8% to 6,255.96.
On the data front in the U.K., the Office for National
Statistics said unemployment in the first quarter rose to 7.9% in
the three-month period to February, up 0.2 percentage points from
September to November last year.
Additionally in the U.K., minutes from the Bank of England's
April meeting showed the nine-member policy-setting committee voted
unanimously to keep rates at a record low 0.5%, while three
members, including Gov. Mervyn King, voted for an increase in asset
purchases.
France's CAC 40 index gave up 1.7% to 3,621.59. Shares of
European Aeronautic Defence & Space Co. jumped 3.8%, as the
company said it bought back 1.56% of its own shares held by the
French state. Additionally, German car maker Daimler AG said it
sold its entire 7.5% stake in EADS. Daimler shares dropped
1.6%.
Outside the major indexes, shares of ASML Holding NV (ASMLD)
jumped 7.3%, after the chip-equipment maker reported first-quarter
sales ahead of market expectations.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires