European stocks fall on Spanish gloom, US data

LONDON — European stock markets fell Monday amid more bad news for indebted Spain and poor US economic data.

London’s FTSE 100 index slid 0.68 percent to close at 5,737.78 points and the Frankfurt DAX 30 was 0.59 percent lower at 6,761.19 points.

In Paris the CAC 40 dropped by a stiff 1.64 percent to 3,212.80 points and Madrid’s IBEX 35 index lost 1.89 percent to 7,011 points as data confirmed that Spain was back in recession and Standard & Poor’s downgraded the top Spanish banks.

In foreign exchange deals, the euro traded for $1.3231 or the same level as late on Friday in New York.

“Once again, the Spanish ulcer is providing cause for concern; anti-austerity protests took place over the weekend and this morning we have had news confirming that Spain slipped back into recession in the first quarter,” said IG Index trader Yusuf Heusen.

“In addition, S&P has downgraded 11 of Spain’s largest banks, mirroring its move last week on the national sovereign debt rating.”

ETX Capital counterpart Markus Huber added that “surprisingly worse than expected economic data out of the US left European equities … on a rather sour note” at the end of April.

Looking ahead, Heusen noted “a busy week for economic news, with manufacturing data from China, the UK and the US tomorrow, and German unemployment on Wednesday, while the week culminates in (US) non-farm payrolls data that will keep markets on edge from Wednesday onwards.”

Huber said that “in light of tomorrow’s Labour Day and the second round of French presidential elections being not far off anymore many traders are preferring to take a wait-and-see attitude by taking some money off the table until things are getting clearer.”

Meanwhile, Spain has back tipped into recession, an official estimate confirmed, even as the government pressed ahead with unpopular spending cuts to rein in burgeoning debt.

Spain’s economy shrank by 0.3 percent in the first quarter, the same rate as in the last three months of 2011. A recession is defined as two successive quarters of shrinking economic output.

And S&P downgraded the ratings of the top Spanish banks, including Santander and BBVA, after slashing the country’s credit standing because of worsening deficit and growth problems.

On Friday, S&P slashed Spain’s sovereign rating by two notches to ‘BBB+’ and said Monday the same considerations “could have potentially negative implications for our view of the economic risk and industry risk affecting the Spanish banking industry.”

There was better news from Germany, Europe’s biggest economy, which said that retail sales rose 0.8 percent in March from February, though that did not prevent the stock market from giving up early gains to close with a loss.

Morning trades in New York left the Dow Jones Industrial Average essentially unchanged meanwhile at 13,223.32 points.

The S&P 500 index had lost 0.32 percent to 1,398.82, while the tech-laden Nasdaq fell 0.50 percent to 3,053.97.

Data on US consumer spending underscored the continued struggle in getting the economy going. Spending growth slowed to 0.3 percent in March, even as personal income growth picked up to a faster 0.4 percent month on month.

Asian markets closed higher however.

Sydney gained 0.79 percent, Seoul put on 0.34 percent and Hong Kong jumped 1.70 percent. Tokyo and Shanghai were closed for public holidays.