EUROPE MARKETS: European Stocks Ease; Ericsson Drops After Results

By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- European stocks lost ground Wednesday, with LM Ericsson AB among the decliners pulling the region's benchmark index back from its hefty gain in the previous session.

The Stoxx Europe 600 shed 0.6% to 335.05, handing back a portion of Tuesday's 1.4% jump that was led by a rally in drug makers. The decline followed three-straight days of wins for the index.

Investors on Wednesday received a better-than-expected reading for euro-zone manufacturing activity in April, but stocks remained lower after the data. An initial reading of Markit's manufacturing Purchasing Managers' Index came in at 53.3, a three-month high that surpassed expectations for a 53.0 reading.

In country-specific breakdowns of activity, "there were upside surprises on the German PMIs, but disappointment in the corresponding French indices," said James Ashley, chief European economists at RBC Capital Markets in a review of the data.

From the perspective of the European Central Bank, the PMIs "are certainly not strong enough to preclude any ECB intervention if other economic indicators disappoint ... but the news from today's surveys is, on balance, moderately encouraging," said Ashley.

Germany's DAX 30 finished 0.6% lower at 9,544.19, and France's CAC 40 declined 0.7% to 4,451.08. The U.K.'s FTSE 100 edged down 0.1% to 6,674.74. Read Matthew Lynn's opinion column on overvaluation of French equities.

Ericsson shares struggled Wednesday, falling 6.1% after the Swedish mobile-network company posted an unexpectedly sharp decline in quarterly revenue to 47.51 billion Swedish kronor ($7.21 billion), from 52.03 billion kronor a year earlier. That missed a consensus projection from analysts of 50.80 billion kronor.

ARM Holdings PLC shares dropped 2.8% as the computer-chip designer was unable to gain traction after reporting a rise in first-quarter profit. Included in that report was 3% year-over-year growth in royalty revenue to $144.5 million, compared with 32% growth in the year-ago quarter.

But shares of Drax Group PLC lost the most on the Stoxx 600 index. They sank 12.1% after one of the British power generator's projects was left off a government list of renewable energy projects eligible for a new system of subsidies. Drax plans to launch legal action to contest the decision, saying the government told it late last year that support for two of its units scheduled for coal-to-biomass conversion in northern England would be available.

Meanwhile, the session's stock winners were paced by an 8.8% leap in Associated British Foods PLC as the company plans to open Primark stores in the northeastern region of the U.S. AB Foods said strength from clothing retailer Primark and grocery units aided in a rise in half-year profit.

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