By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets posted sharp losses on Monday, with miners leading the drive south as gold prices tanked and data showed China’s economy grew more slowly than expected in the first quarter.
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +0.06% dropped 0.7% to close at 290.43, after declining 0.9% on Friday.
Gold careens into bear territory
Gold enters bear market territory as the metal's allure fades amid a rising stock market and tame inflation. (Photo: Getty Images)
“There are plenty of negative fundamentals out there today. The Chinese GDP data started the weak on a soft note and then we had U.S. data that also weighed on markets,” said Victoria Clarke, economist at Investec Securities.
“We’ve seen a switch from [the rally in] Q1 to Q2, where there are worries that this turns into a longer soft patch and not just in the U.S., but in the global economy. Payroll-tax hikes and the sequester in the U.S. have started to have an impact,” she said.
In the first quarter this year, European and U.S. stock markets rallied on both massive easing from central banks globally and expectations of a pick up in the economic recovery.
Mining firms led declines on Monday, keying off losses in Asia, after data showed gross domestic product for the first quarter in China expanded 7.7%, falling short of expectations of an 8% rise. In the fourth quarter last year the economy grew 7.9%.
Additionally, industrial production rose 8.9% in March, well below the Dow Jones Newswires forecast for a 10% gain.
“While today’s weak data certainly put into question the strength of the recovery in China, the manufacturing PMIs and leading indicators so far do not suggest that China has entered a renewed phase of deceleration in GDP growth,” analysts at Danske Bank said in a note.
“We still expect GDP growth to improve in Q2 13 and China to be in a moderate recovery in 2013 but we might have to alter that view if the manufacturing PMIs start to weaken in the coming months,” they added.
Metals prices also slumped, with gold prices shaving off more than $120 to around $1,374.70 an ounce. Silver sank 11% to $23.43 an ounce.
Shares of Fresnillo PLC /zigman2/quotes/201300065/delayed UK:FRES +3.17% tumbled 15% in London, Polymetal International PLC /zigman2/quotes/204469675/delayed UK:POLY -0.16% gave up 13%, Randgold Resources Ltd. sank 8.3% and Kazakhmys PLC /zigman2/quotes/208098927/delayed UK:KAZ +0.16% lost 9%.
On the data front in the U.S., the New York Fed’s Empire State index fell to 3.1 points in April, below expectations of a 7.8 reading. Readings above zero indicate respondents on net saw better conditions.
Additionally, a gauge of confidence among house builders fell for a third month in April.
U.S. stocks traded lower open on Wall Street.
Back in Europe, shares of drug maker Roche Holding AG /zigman2/quotes/206324342/delayed CH:ROG -0.41% rose 2.7% to 231.10 Swiss francs ($249), as J.P. Morgan Cazenove reiterated its overweight rating on the stock and lifted the target price to 280 Swiss francs from 270 francs. The goal translates to a roughly $75 target on the U.S.-listed Roche /zigman2/quotes/208994986/delayed RHHBY +0.78% shares.
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Other drug makers were also higher, with shares of Novartis AG /zigman2/quotes/203286410/delayed CH:NOVN -0.10% /zigman2/quotes/203243705/composite NVS +1.00% up 1.8% and Sanofi SA /zigman2/quotes/206928357/delayed FR:SAN +0.09% /zigman2/quotes/201967021/composite SNY +0.56% 3% higher in Paris.
France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 +0.54% , however, lost 0.5% to 3,710.48. Accor SA /zigman2/quotes/203800565/delayed FR:AC -0.20% slid 4.2%, after Credit Suisse cut the hotels operator to underperform from outperform.
Shares of advertising firm Publicis Groupe SA /zigman2/quotes/207669560/delayed FR:PUB -0.36% shaved off 5.2%, after the company reported lower-than-expected organic revenue growth for the first quarter, saying 2013 is turning out to be a difficult year.
Shares of Compagnie de Saint-Gobain SA /zigman2/quotes/201813666/delayed FR:SGO +0.55% advanced 0.9%, as Bank of America Merrill Lynch lifted the construction firm to buy from underperform.
Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX +0.24% closed 0.4% lower at 7,712.63, with shares of Commerzbank AG /zigman2/quotes/200193353/delayed DE:CBK +1.66% down 1.4% and Deutsche Bank AG /zigman2/quotes/205584254/delayed DE:DBK +0.94% /zigman2/quotes/203042512/composite DB -0.79% 0.5% lower.
Outside the main index in Germany, Shares of Sky Deutschland AG gained 0.3%, after J.P. Morgan Cazenove raised the firm to overweight from neutral, citing higher confidence in profitability and margins.