Euro stocks close down on negative summit views; DAX off 1.27%

Investing.com - European stocks closed lower again Thursday, although off the lows,  as market sentiment weakened amid growing skepticism over the outcome of this week’s European Union summit in Brussels, while Italian and Spanish borrowing costs remained dangerously high.

At the close of European trade, the EURO STOXX 50 dropped 0.37%, France’s CAC 40 tumbled 0.37%, while Germany’s DAX 30 plummeted 1.27%.

Equity sentiment was hit after a German government official indicated that the EU summit would not result in any detailed decisions and warned against high expectations among investors ahead of the conclusion of the summit on Friday.

Earlier in the week, German Chancellor Angel Merkel reiterated her opposition to the idea of joint euro zone bonds.

Adding to the negative tone, Italy saw long term borrowing costs rose to 6.19%, their highest level since December, following an auction of 10-year bonds. Meanwhile, the yield on Spanish 10-year bonds ticked up to 7%, the level that prompted Greece, Ireland and Portugal to seek international bailouts.

Financial stocks pushed broadly lower, led by German Commerzbank, down 7.08%, and Deutsche Bank, with shares plummeting 3.69%.

France’s BNP Paribas and Societe Generale also extended losses, tumbling 2.29% and 1.46% respectively, while peripheral lenders turned higher, as Italy’s Unicredit surged 3.50%, Intesa Sanpaolo climbed 0.70% and Spanish BBVA advanced 0.69%.

Meanwhile, automakers erased earlier gains, as shares in Daimler tumbled 1.46% and Volkswagen dropped 0.97%, while French group Renault plunged 1.38%.

On the upside, Paris-based Veolia Environnement rallied 0.98% after agreeing to sell the water business to Rift Acquisitions Ltd., an acquisition entity formed by Infracapital Partners and Morgan Stanley Infrastructure Partners. Veolia called the sale the first “significant step” in an asset-divestment program that it announced in December.

In London, FTSE 100 plunged 1.23%, weighed by losses in financial stocks and after official data confirmed that the U.K.’s economy contracted by 0.3% in the first quarter.

Shares in Barclays dove 10.30% after U.S. and U.K. authorities announced on Wednesday that they had fined the bank more than USD450 million for attempting to manipulate the London interbank offered rate, a benchmark interest rate.

The Royal Bank of Scotland saw shares plummet 7.66% and Lloyds Banking plunged 5.83%, while HSBC Holdings tumbled 2.60%.

Mining stocks also remained broadly lower, as shares in Rio Tinto fell 0.29%, while copper producers Xstrata and Kazakhmys declined 0.85% and 0.22% respectively.

Elsewhere, the U.K.’s second-largest department-store chain, Debenhams Plc saw shares decline 1.26% after it reduced its gross margin for the year by 0.3% from last year’s level. 

In the U.S., equity markets followed lower with the Dow off 1.09% fall, the S&P 500 down 1.06%, while the Nasdaq 100 gave back 1.54% during midsession trade.

Also Thursday, official data showed that the number of unemployed people in Germany rose by a seasonally adjusted 7,000 in June, above expectations for an increase of 5,000, but the unemployment rate held steady at 6.8%.

Investors are awaiting U.S. consumer sentiment numbers, the euro zone CPI and a talk by BOE’s Gov King on Friday.