EUROPE MARKETS: Europe Stocks Pull Back After Retail Sales Jump

By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) -- European stocks gave up a loose hold on gains Wednesday, after a batch of data including stronger-than-expected euro-zone retail sales. Peripheral markets such as Portugal and Spain were again strong performers as borrowing costs remained low for those countries.

Minutes from the U.S. Federal Reserve, due later in the day, were expected to keep many investors in a holding pattern.

The Stoxx Europe 600 index fell 0.1% to 329. The index closed at 329.40 on Wednesday, its highest closing value since May 19, 2008. The move was driven by upbeat German unemployment data and falling European borrowing costs, which were reflected in bond prices.

Among stocks on the move, shares of Akzo Nobel NV fell 3.5% after the Dutch painting and chemicals company said it would continue to cut costs in 2014 and kept its outlook for 2013.

Shares of Scor SE also fell 3.5% after the global reinsurer was cut to neutral from overweight at J.P. Morgan Cazenove, where analysts said the sector is in a soft cycle that will slow earnings growth for those companies. While Scor is best-placed to offset this with lower hedging costs, the analysts said, they cut earnings-per-share forecasts for it by 8% for 2014 and 4% for 2015, and reduced dividend forecasts.

Shares of Air France-KLM SA rose 7% after the airline reported a rise in passenger traffic of 2.1% and a load factor rise of 0.9 points. The unit revenue per available seat-kilometer was "resilient," the company said.

European stocks got a few pieces of data on Wednesday. Retail sales for the euro-zone rose at the fastest pace in 12 years during November, lifting hopes for a revival in domestic demand. The sales jump came as a surprise as the euro-zone's unemployment rate stayed stubbornly high in November, unchanged at 12.1%.

Other data showed German manufacturing orders surging in November amid a glut of bulk orders.

The data comes ahead of a monthly meeting of the European Central Bank on Thursday. Some had been speculating that ECB President Mario Draghi may have to take a dovish tone, given the single-currency zone saw another fall in inflation on Tuesday. The Bank of England's Monetary Policy Committee will also announce a rate decision Thursday.

The rally for Europe stocks on Wednesday was fueled by upbeat German employment numbers and falling borrowing costs across Europe's periphery, which helped lift the Spain IBEX 35 index to its best levels since mid-2011 on falling bond yields, but the IBEX flattened out on Wednesday.

Portugal's PSI 20 held to a gain of 0.8% to 7,019.34, led by 2.8% rise for Banco Espirito Santo SA

Among other indexes, the German DAX 30 index fell 0.1% to 9,493.20, and the French CAC 40 index was flat at 4,259.09.

The FTSE 100 fell 0.4% to 6,728.62 after the Halifax House Price index showed a drop of 0.6% in December, the first decline in a year.

Among the heavyweights, shares of British American Tobacco PLC fell 1%.

Away from the main indexes, shares of Mothercare PLC tumbled 27% after a profit warning. The international mother-and-baby goods retailer said worldwide network sales fell 4.4% in the 12 weeks to Jan. 4, with the U.K. hit particularly hard by promotional sales over the Christmas period. Mothercare's chief executive, Simon Calver, said the company remains cautious looking forward and full-year profits will likely be below the current range of market expectations.

U.S. stock futures eased as investors awaited the Fed minutes of its Dec. 18 meeting, which will come after the close of European markets. The U.S. also has ADP employment data on tap for later, which precedes Friday's all-important nonfarm-payrolls data.

More stories from MarketWatch:

Euro-zone retail sales rise is fastest in 12 years

German manufacturing orders surge in November

Subscribe to WSJ: http://online.wsj.com?mod=djnwires