EUROPE MARKETS: Europe Stocks Slip After Mixed Data, Earnings

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- European stocks on Thursday ended the last day of January on a downbeat note, as stronger-than-expected U.S. business-activity data failed to offset a mixed bag of earnings and downbeat comments from a day earlier from the Federal Reserve.

The Stoxx Europe 600 index dropped 0.5% to 287.22, adding to a 0.6% loss from Wednesday. For the month, the index gained 2.7%, marking the strongest monthly performance since July last year.

Meanwhile, U.S. stocks traded mostly lower on Wall Street.

"The pace of the gains over the past month has created an element of nervousness and that's a factor that has been sitting on the market for the last couple of days," said Keith Bowman, equity analyst at Hargreaves Lansdown.

"We've had some worries from yesterday's [U.S.] GDP numbers and investors are still mulling that over. At the same time they are looking toward nonfarm payrolls due tomorrow to provide a firmer figure," he said.

Shares of Ericsson LM posted some of the biggest gains in the index, rising 7.6% after the telecom-equipment supplier said it expects profitability to improve in the second half of 2013.

On a downbeat note, shares of AstraZeneca PLC (AZN) sank 3.2%. The U.K. drug maker warned in its quarterly earnings report that sharp declines in revenue and earnings would continue through 2013 after it lost patents on key drugs.

U.S. data

The broader European market briefly trimmed losses in late-session action, after the Chicago purchasing managers' index rose to the highest level since April 2012.

Meanwhile, the Labor Department said the number of people applying for jobless benefits jumped by 38,000 last week to 368,000, marking the biggest increase since the week after Superstorm Sandy.

On Friday, attention turns to the monthly U.S. nonfarm-payroll report as well as the latest reading on the unemployment rate.

European markets had started the session on a weak footing as investors looked to the previous day's moves on Wall Street, where stocks retreated from a five-year high on the back of a surprise contraction in fourth-quarter growth.

As expected, the Federal Reserve on Wednesday maintained its aggressive monetary- easing program, citing downside risks to the economic outlook. The central bank noted that growth in economic activity paused in recent months, although mainly due to weather and other transitory factors.

"The overall assessment of the economy and the labor market was not much different than in December. On inflation, it is pretty clear that it is not going to be the binding constraint on the Fed's monetary policy," analysts at Danske Bank said in a note.

Movers

Back in Europe, most bank shares were under pressure. Banco Santander SA (SAN) gave up 3.5% after the bank's fourth-quarter earnings missed analyst expectations and net interest income declined from the year-earlier period.

Spain's IBEX 35 index slumped 2.5% to 8,362.30, but gained 2.4% on the month.

In the U.K., shares of Royal Bank of Scotland Group PLC (RBS) shed 1.1%, while sector heavyweight HSBC Holdings PLC (HBC) gave up 1%. The Financial Services Authority ordered the four largest U.K. banks by assets to pay out compensation to small-business customers following failings in how the banks marketed products to reduce interest-rate risks.

Royal Dutch Shell PLC (RDSB) was also lower in London, down 2.9%, after the oil group posted fourth-quarter results below views.

The FTSE 100 index dropped 0.7% to 6,276.88, although climbing 6.4% on a monthly basis.

France's CAC 40 index lost 0.9% to 3,732.60, with shares of Credit Agricole SA down 1.5%. The French benchmark gained 2.5% on the month.

Shares of Essilor International SA slid 2.4% as Exane BNP Paribas cut the maker of contact lenses to neutral from outperform.

Germany's DAX 30 index fell 0.5% to 7,776.05, with Commerzbank AG 0.9% lower. The index rose 2.2% in January.

The losses came even as data showed the unemployment rate in Germany dropped to 6.8% in January from 6.9%.

Shares of Deutsche Bank AG (DB) climbed 2.9% after the firm said it swung to a loss in the fourth quarter to clean up its business, but that underlying performance improved. and

Infineon Technologies AG jumped 3.9%, after the chip maker backed its fiscal year outlook, even as first-quarter revenue missed market expectations.

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