Euro zone stocks down on German numbers, Spanish worries; DAX off 1.26%

Investing.com - European stocks closed lower Friday on declining German business confidence and Spanish debt fears.

At the close of European trade, the EURO STOXX 50 fell 0.57%, France’s CAC 40 gave back 0.75%, while Germany’s DAX 30 plunged 1.26%.

Sparking the bearish sentiment, Germany’s Ifo business climate fell more-than-expected last month, data showed on Friday.

In a report, the Ifo Institute for Economic Research said its index of German business climate fell to 105.3, from 106.9 in the preceding month .

Analysts had expected the index to fall to 105.9 last month. 

On Thursday, Spain’s Treasury sold EUR602 million worth of five-year government bonds at an average yield of 6.072% earlier in the day, up sharply from 4.752% at a similar auction last month.

Demand was stronger, however, with bids exceeding supply 3.44 times versus a "bid-to-cover" ratio of 3.14 in May.

Spain also sold EUR918 million of three-year debt at an average yield of 5.547%, up from 4.876% at a similar auction last month. The bid-to-cover ratio stood at 3.18, compared to 3.01 at an auction in May.

The country also auctioned EUR700 million of two-year debt at an average yield of 4.706%, compared to 4.335% at a similar auction last month. The bid-to-cover ratio stood at 3.97, compared to 2.81 at an auction in May.

In total, Spain’s Treasury sold EUR2.22 billion of government debt, above the full targeted amount of EUR2 billion. 

Bond auctions have become key drivers of risk sentiment in recent months, as traders attempt to gauge the ability of indebted euro zone nations to fund themselves.

The yield on Spanish 10-year bonds eased to 6.65% following the auction, down from 6.74% before the results. Yields hit a record high 7.28% on Monday. 

Meanwhile, the Federal Reserve increased its Operation Twist but it is widely viewed as not adequate to stem the global slowdown, hurting stock sentiment.

German carmakers were hit hard by the sentiment drop and increased rebates with Volkswagen falling 1.3%. BMW giving back 1.2% and Porsche dropping 1.8%

U.K. recruitment agency fell 5.5% after being slashed to underperform by Credit Suisse.

Pharmaceutical maker Bayer gave back 2.2% after failing to gain FDA approval for its heart attack drug.

In London, commodity-heavy FTSE 100 fell 0.95%, weighed by sharp losses mining and energy stocks. 

Fortunately for the bulls, the Moody bank downgrades did little to lower banking shares with Credit Suisse adding 0.01% and Societe Generale up by 0.31%

U.S. shares are trading higher with the Dow up 0.53%, the S&P 500 ahead by 0.43% and the tech heavy Nasdaq climbing by 0.63% during midsession trade.