European Markets Pulled Back On Weak Chinese Data & Earnings

( - The European markets finished solidly in negative territory on Thursday. Investor sentiment took a hit from the weaker than anticipated Chinese manufacturing data, as well as some weaker than expected corporate earnings reports. Investors continue to look forward to the Federal Reserve policy meeting next week.

A key indicator of China's factory sector performance declined sharply in January to a level indicating contraction in business activity, as the volume of new work inflow declined, flash results of a survey by Markit Economics and HSBC revealed Thursday. The headline purchasing managers' index fell to a six-month low of 49.6 in January from 50.5 in December.

European Central Bank President Mario Draghi said he is neither concerned about inflation nor deflation.

The risks of deflation and inflation are limited, Draghi said in an interview with the Swiss daily Neue Zuercher Zeitung. Further, he assured that the central bank has many instruments to ensure price stability.

Draghi said inflation expectations in the euro area remained well anchored in the medium term.

There is no immediate need to hike the Bank of England's key policy rate even if the 7 percent unemployment rate threshold is reached in the near future, BoE Executive Director for Markets Paul Fisher said Thursday.

With inflation back at target, and the level of output still below its pre-crisis peak, "we are still some way off the point where it is appropriate to start raising Bank Rate and that when it is time, it would be appropriate to do so only gradually," Fisher said in a speech at the State Street Global Advisors London Pensions and Investments Breakfast Briefing.

Any recovery in business investment will require not only a pickup in final demand, but a sustained decline in uncertainty, Bank of England policy maker Ian McCafferty said Wednesday.

"There are encouraging signs that this is now happening," he said in a speech to business leaders in Nottingham, England. The U.K. is in the "very early stages" of an investment recovery, he noted.

The conditions needed for a recovery in business investment are finally falling in place. He observed that companies will have to adopt a 'make do and mend' approach in order to make the investment plans possible.

Nonetheless, policymaker expects more rapid investment growth to happen later this year and into 2015.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 1.01 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 1.02 percent.

The DAX of Germany dropped by 0.92 percent and the CAC 40 of France tumbled by 1.02 percent. The FTSE 100 of the U.K. decreased by 0.78 percent and the SMI of Switzerland fell by 0.73 percent.

In London, Anglo American rose by 1.02 percent. The diversified miner confirmed that the Association of Construction and Mineworkers Union affiliated employees have begun industrial action at the Rustenburg, Union and Amandelbult operations, following the notification of such action served on the firm on January 20, 2014.

Marks & Spencer advanced by 2.56 percent, after BNP Paribas upgraded it to "Outperform" from "Underperform."

EasyJet dropped by 4.07 percent, after it forecast a first-half loss of GBP 70 million to GBP 90 million.

Pearson sank by 9.15 percent, after it provided a disappointing outlook for the full year 2014.

UBS dipped by 1.87 percent in Zurich. Bloomberg reported that at least four lenders, including UBS and JPMorgan Chase & Co., are in discussions to settle a third European Union probe into derivatives linked to benchmark rates like Libor.

Logitech International surged by 18.03 percent after reporting quarterly profit and revenue that topped analysts' estimates.

Nokia fell by 10.66 percent in Helsinki, after it reported a fourth quarter loss, compared to the prior year's profit.

Delhaize Group surged by 7.19 percent in Brussels, after its fourth quarter revenues increased.

Eurozone's private sector growth accelerated more-than-expected in January, led by a further strong expansion in Germany, with both the manufacturing and service sectors recording above-trend improvement in business activity.

Data published by Markit Economics on Thursday showed that the activity indicator for the euro area private sector climbed to 53.2 from 52.1 in December. Economists had expected the index to rise to 52.5.

The euro area current account surplus increased for the second straight month in November, driven by a notable increase in exports of goods, data published by the European Central Bank showed Thursday. The current account surplus totaled seasonally adjusted EUR 23.5 billion compared to EUR 22.2 billion in October.

Germany's private sector expanded at the fastest pace in over two-and-a-half years in December, survey data from Markit Economics showed Thursday. The flash composite output index rose to 55.9 in January from 55 in December.

Germany's leading economic index increased for the second successive month in November, signaling that the economy will continue to grow in the first half, survey data published by the Conference Board showed Thursday.

The leading economic index rose 0.6 percent month-on-month to 108.2 in November. This followed a 0.2 percent gain in October and a 0.2 percent fall in September. The largest positive contributions came from the yield spread, stock prices, and consumer confidence.

French private sector business activity declined at a slower pace in January, flash results of a survey by Markit Economics showed Thursday. The flash composite output index, that measures the performance of the manufacturing and service sectors combined, rose to 48.5 in January from 47.3 in December.

France's business confidence remained unchanged in January, in line with economists' expectations, data from a survey revealed Thursday. The confidence indicator for the manufacturing sector stayed unchanged at 100 January, statistical office Insee said. The outcome also matched economists' forecast.

U.K. retail sales growth slowed at a faster than expected pace at the start of the year and are likely to remain modest next month, a monthly survey by the Confederation of British Industry showed on Thursday. The CBI Distributive Trade survey balance fell to 14 in January from 34 in December. Economists had forecast a figure of 25.

After reporting first-time claims for U.S. unemployment benefits at their lowest level in over a month in the previous week, the Labor Department released a report on Thursday showing a smaller than expected rebound in claims in the week ended January 18th.

The report said initial jobless claims edged up to 326,000, an increase of 1,000 from the previous week's revised figure of 325,000. Economists had expected claims to climb to 330,000 from the 326,000 originally reported for the previous week.

Existing home sales in the U.S. rebounded in December after seeing a sharp drop in the previous month, according to a report released by the National Association of Realtors on Thursday. NAR said existing home sales climbed 1.0 percent to an annual rate of 4.87 million in December after tumbling 5.9 percent to a downwardly revised 4.82 million in November.

Economists had expected existing home sales to edge up to 4.93 million from the 4.90 million originally reported for the previous month, reflecting a 0.6 percent increase.

Partly reflecting improvements in the financial components, the Conference Board released a report on Thursday showing a modest increase by its index of leading U.S. economic indicators in the month of December.

The Conference Board said the leading economic index edged up by 0.1 percent in December following an upwardly revised 1.0 percent increase in November. Economists had expected the index to rise by about 0.2 percent compared to the 0.8 percent advance originally reported for the previous month.

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