European stocks lower after Spain bond sale; DAX drops 1.42%

Investing.com - European stock markets extended losses on Thursday, as market sentiment was hit after Spanish borrowing costs rose to a euro-era high following a 10-year government bond auction. 

During European morning trade, the EURO STOXX 50 tumbled 1.25%, France’s CAC 40 plummeted 1.55%, while Germany’s DAX 30 dropped 1.42%.

Spain sold EUR3.56 billion of 10-year bonds at 6.97% at an undersubscribed auction, while France sold EUR3.33 billion of 2016 notes at a yield of 2.82%.

Following the auction, the European Central Bank resumed purchases of Spanish government debt to ease pressure on borrowing costs.

Market sentiment was hit earlier, after ratings agency Fitch warned about the
potential adverse impact of euro zone’s debt crisis on the U.S. banking sector shortly after Moody’s downgraded the ratings of 12 German public-sector banks.

The financial sector remained sharply lower, as shares in France's BNP Paribas plunged 3.83% and Societe Generale tumbled 3.11%, while German lenders Deutsche Bank and Commerzbank plummeted 2.19% and 2.55% respectively.

Peripheral lenders also contributed to losses with shares in Italian banks Intesa Sanpaolo and Banca Popolare di Milano declining 2.12% and 0.33%, while Spain's Banco Santander dropped 1.36%.

Meanwhile, ASML Holding saw shares plummet 2.35% after Europe's biggest semiconductor-equipment maker forecast lower-than-expected first-quarter sales and profit.

Also in company news, Dutch owner of Stop & Shop grocery stores, Ahold rose 0.16% after reporting a 15% rise in third-quarter net profit to EUR257 million.

In London, FTSE 100 plunged 2.05% as U.K. lenders tracked their European counterparts lower.

Shares in Lloyds Banking tumbled 4.34% and Barclays plummeted 3.26%, while the Royal Bank of Scotland and HSBC Holdings saw shares drop 2.75% and 2.68% respectively.

Meanwhile, energy stocks were also broadly lower as mining giants Rio Tinto and Bhp Billiton plunged 3.30% and 2.74%, while British Petroleum declined 2.70%.

Copper producer Xstrata was one of the day's top losers with shares sinking 4.70%, closely followed by Kazakhmys, tumbling 3.03%.

Centrica, the U.K.'s largest residential gas and power supplier tumbled 2.14 after saying that 2011 earnings may be "marginally" lower than estimated because warmer-than- average weather has cut natural-gas demand.

In the U.S., equity markets pointed to a lower open. The Dow Jones Industrial Average futures pointed to a fall of 0.19%, S&P 500 futures signaled a 0.36% drop, while the Nasdaq 100 futures indicated a 0.30% decline.

Later in the day, the U.S. was to release official data on initial jobless claims, building permits and housing starts and a report on manufacturing activity in the Philadelphia region.