European stocks drop after poor PMI data

European stock markets dropped yesterday, as a gauge of business activity in the eurozone unexpectedly signalled contraction in February and Fitch downgraded Greece’s credit rating.The Stoxx Europe 600 index closed 0.8% lower at 264.59, adding to Tuesday’s losses.On the upside, Peugeot jumped 12.1% after the French car maker late Tuesday said that it was in talks on a possible tie-up. It didn’t identify the potential partner, but French newspaper La Tribune said General Motors Co the likely ally. Shares of GM were off 1.3% in US trade.GM said in a statement that it “is routinely talking to others in the industry, but does not have any comment beyond that.”Also in Paris, Schneider Electric added 6%. The company reported a 5.8% profit rise for 2011, while sales rose 14%. The group said it sees flat growth in 2012.The French CAC 40 index fell 0.5% to 3,447.37, with banks such as Credit Agricole down 3.8% and Societe Generale off 4.4%.Earlier yesterday, data showed a surprise fall in private-sector activity in the eurozone.The preliminary Markit purchasing-managers index fell to 49.7 in February from 50.4 in January. A reading below 50 signals contraction. Economists surveyed by Dow Jones Newswires had forecast a rise to 50.8.A flash estimate for Germany’s composite output index signalled expansion, although at a slower pace than the seven-month high reached in January. The German Dax 30 index fell 0.9% to 6,843.87, pulled lower by banks.Deutsche Bank fell 2.4%, and Commerzbank lost 3.3%. Deutsche Lufthansa was off 2.6% as a strike in the airlines’ main European hub, Frankfurt, continued yesterday.Banks were also pressured amid fresh concerns about Greece.The Athens General Index tumbled 5.7% to 751.96 after Fitch Ratings cut Greece’s credit rating to C from CCC and reiterated that a bond-swap agreement with private creditors would be a restricted default. Shares of National Bank of Greece sank 12.7%.“The Greek deal was a non-deal. There are a lot of things that need to be agreed over the next two weeks,” said Steen Jakobsen, chief economist at Saxo Bank, who said markets are getting nervous about implementation of the deal.“This could be the peak of the year and it’s unlikely Greece will live for another three months without a controlled default.”The bailout package assumes that 95% of the private investors will participate in the bond swapping, a rate Jakobsen said is unlikely to be reached.Italian banks also declined. UniCredit shed 3.9%, Intesa Sanpaolo and Unione di Banche Italiane both lost 3.1%.In London, the FTSE 100 index lost 0.2% to 5,916.55, weighed down by a 2.3% loss for Tesco after Bank of America Merrill Lynch downgraded the stock to underperform from neutral.Retailer Marks & Spencer Group lost 1.6%. Mining stocks fell also in London after a gauge of Chinese factory activity rose to a four-month high in February, but still showed contraction.China is a large consumer of natural resources and mining firms tend to be sensitive to growth indications from the world’s second-largest economy.Shares of Vedanta Resources fell 5%, Evraz fell 3.8% and Kazakhmys fell 1.3%.Also among notable decliners in Europe yesterday, Straumann Holding fell 8.4%. The Basel provider of dental products and services reported that 2011 net income per share fell 46%, or 25%, on an adjusted basis. It also said it sees challenges ahead in Europe.