European Markets Dropped On Weak U.S. Data & Commodity Pressure

(RTTNews) - The European markets finished solidly in the red on Wednesday largely due to some weaker than expected economic data from the United States. Concerns over global growth also weighed on investor sentiment, after the World Bank downgraded its global economic forecast.

Metal and mining stocks sank after the price of copper dropped to its lowest level since 2009. Financial stocks were also under pressure, following the weaker than expected earnings report from U.S. bank JP Morgan Chase.

Despite an uptick in developing countries and strong momentum in the United States, the World Bank downgraded its global economic forecast citing weak prospects for the euro area and Japan.

In its biannual report 'Global Economic Prospects' released Tuesday, the World Bank said global gross domestic product is expected to grow 3 percent in 2015, slower than the 3.4 percent estimated in June.

For 2016, the economy is projected to expand 3.3 percent instead of 3.5 percent. The bank predicted 3.2 percent growth for 2017.

According to the World Bank, downside risks to the outlook are persistently weak global trade, possibility of financial market volatility, the extent to which low oil prices strain balance sheets in oil producing countries, and the risk of a prolonged period of stagnation or deflation in the euro area or Japan.

The Commerce Department released a report on Wednesday showing that U.S. retail sales fell by much more than anticipated in the month of December. Retail sales slumped by 0.9 percent in December, while economists had expected sales to edge down by just 0.1 percent.

Import prices in the U.S. showed another substantial decrease in the month of December, the Labor Department revealed in a report on Wednesday, with fuel prices leading the way lower once again. The Labor Department said its import price index plummeted by 2.5 percent in December after tumbling by a revised 1.8 percent in November. Economists had expected import prices to slump by 2.7 percent.

Additionally, the report said export prices fell by 1.2 percent in December following a 0.8 percent drop in November. Export prices had been expected to fall by 0.5 percent.

An earlier bond-buying programme announced by the European Central Bank won a crucial legal backing from the top EU court on Wednesday, giving boost to speculation that the central bank may opt for full blown quantitative easing as early as this month, which could include government debt purchases, as it battles the threat of deflation in the euro area.

In his opinion note, Advocate General Pedro Cruz Villalon of the EU Court of Justice said, " The OMT programme..falls within the monetary policy for which the Treaty makes the ECB responsible and does not constitute an economic policy measure, provided that, throughout the whole period of implementation of any OMT programme, the ECB refrains from any direct involvement in the financial assistance programmes to which the OMT programme is linked."

"The stated objectives of the OMT programme may in principle be accepted as legitimate," he said.

The Euro Stoxx 50 index of eurozone bluechip stocks decreased by 1.38 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 1.78 percent.

The DAX of Germany declined by 1.25 percent and the CAC 40 of France fell by 1.56 percent. The FTSE 100 of the U.K. dropped by 2.35 percent and the SMI of Switzerland finished down by 0.94 percent.

In Frankfurt, Deutsche Bank fell by 1.70 percent and Commerzbank lost 4.08 percent. Goldman Sachs lowered Commerzbank to "Sell" from "Neutral."

Exane BNP reduced its rating on BMW to "Underperform" from "Neutral." The stock finished lower by 2.04 percent.

ThyssenKrupp dropped by 5.68 percent, amid global growth worries.

In Paris, Societe Generale declined by 1.12 percent. BNP Paribas fell by 3.04 percent and Credit Agricole lost 0.53 percent.

Electricite de France sank by 5.81 percent, on concerns that it may need to lower its dividend.

Air France-KLM decreased by 4.35 percent. The company denied a report that it is planning to cut about 5,000 jobs.

ArecelorMittal dropped by 5.35 percent and GDF Suez fell by 3.33 percent.

Carrefour ended the session with a gain of 2.25 percent.

In London, Tesco climbed by 0.94 percent. BNP raised Tesco to "Outperform" from "Neutral."

Mining stocks were weak, due to the drop in copper prices. Anglo American sank by 8.99 percent and BHP Billiton fell by 5.31 percent. Glencore plunged by 9.28 percent and Rio Tinto lost 3.96 percent.

Barclays dropped by 4.06 percent and Lloyds Banking Group fell by 1.50 percent. HSBC decreased by 2.33 percent and Royal Bank of Scotland lost 2.94 percent.

Eurozone industrial production increased for the third consecutive month in November, Eurostat reported Wednesday. Industrial production rose 0.2 percent in November from October when it was up by revised 0.3 percent. The October figure was revised up from 0.1 percent. Economists had forecast output to remain flat.

France's EU measure of inflation slowed less-than-expected in the final month of 2014, figures from the statistical office INSEE showed Wednesday. The harmonized index of consumer prices, or HICP, rose 0.1 percent after climbing 0.4 percent in November. Economists had expected a zero inflation figure for the month.

The French current account balance turned to surplus in November as the deficit on goods trade narrowed from October, the Bank of France showed Wednesday. The current account balance showed a surplus of EUR 0.2 billion compared to a deficit of EUR 0.4 billion in October.

The leading economic index in the UK, which measures the future economic activity, dropped for the third straight month in November, figures from the Conference Board showed Wednesday. The Conference Board leading economic index fell 0.3 percent in November, same as in both September and October.