By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets dropped on
Wednesday after U.S. jobs data missed expectations and investors
remained cautious ahead of the European Central Bank's policy
meeting.
The Stoxx Europe 600 index fell 0.2% to 296.89, partly erasing a
1.3% jump from Tuesday.
Shares of Delhaize Group posted some of the biggest losses in
the index, down 4.4%, after HSBC cut the supermarkets operator to
underweight from neutral.
Telecom firms were also in the downgrading spotlight, with
Telecom Italia SpA off 4.5% after UBS cut the firm to sell from
buy, while France Télécom lost 4.6% after the bank slashed the
rating to sell from neutral.
For investors, U.S. jobs data were also in focus. Automatic Data
Processing Inc. (ADP) said private-sector employment expanded by
158,000 jobs in March, well below expectations of a 215,000 gain.
Markets look to ADP's report on private-sector payrolls to provide
some guidance on the closely watched nonfarm-payroll report, which
will be released Friday. U.S. stock futures pointed to a flat open
on Wall Street.
Investors awaited policy decisions from both the European
Central Bank and Bank of England due on Thursday. Both banks are
widely expected to keep rates on hold, although recent weak data
raised expectations the ECB could act to boost the economy.
"We expect the [ECB] governing council to discuss rate cuts, as
the recession has deepened across the euro area. We estimate the
likelihood of a rate cut is 25%," analysts at Danske Bank wrote in
a note.
"The main reason for the ECB to hold rates unchanged is that it
continues to expect the economy to improve in the medium term. In
addition, the monetary transmission mechanism remains broken so
that the real economy would not benefit fully from a rate cut,"
they added.
Back in Europe, Cyprus got a slice of the limelight, as
lawmakers and the International Monetary Fund finalized an
agreement that will see the IMF contribute one billion euros ($1.28
billion) to the country's bailout in addition to EUR9 billion from
euro-zone institutions.
In the U.K., the FTSE 100 index lost 0.4% to 6,461.85. Shares of
Vodafone Group PLC (VOD) dropped 1.9%, after rising to its highest
level in more than five years on Tuesday on reports Verizon
Communications Inc. (VZ) and AT&T Inc. (T) were putting
together a takeover bid. Verizon said late Tuesday it has no plans
to merge with or make an offer for the U.K. telecom firm, although
stating it remains interested in buying Vodafone's 45% stake in
Verizon Wireless.
Germany's DAX 30 index traded 0.2% lower at 7,928.72, while
France's CAC 40 index lost 0.5% to 3,786.60.
Shares of Adidas AG added 0.4% in Frankfurt, boosted by
Citigroup reiterating its buy rating on the sports and apparel
firm.
Outside the major indexes, shares of SMB Offshore NV fell 2.7%,
after the oil-services firm said it may have violated
anticorruption laws and could face penalties and criminal
prosecution.
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