By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets retreated on
Tuesday, giving back some of the prior day's gains, after ZEW data
showed German investor confidence declined for a seventh straight
month and added to concerns about the country's economic
growth.
The Stoxx Europe 600 index fell 0.2% to 339.26, on track to
break a two-day winning streak.
Shares of Software AG led losers in the pan-European index and
tanked 16% after the German software maker cut its 2014 outlook for
sales growth at its biggest business.
Banco Espírito Santo SA declined for a seventh straight day,
down 12%. The slide started last week when parent company Espirito
Santo International missed a debt payment, triggering concerns
about Portugal's banking system and prompting a sharp selloff in
the wider European market.
Portugal's PSI 20 index slid 1.1% to 6,113.34 on Tuesday,
extending its monthly loss to almost 16%.
Among other country-specific indexes, Germany's DAX 30 index
fell 0.5% to 9,735.25, building on losses after ZEW said its
indicator of economic sentiment in Germany fell for a seventh
straight month.
"Germany has experienced a slight dent in economic activity
recently," said ZEW President Clemens Fuest in the data
release.
The economic sentiment report comes after a string of weak
German data out over the past weeks, including disappointing
industrial production, worrying unemployment numbers and
unexpectedly weak trade figures. Read: Is Germany leading the euro
zone toward the no-growth cliff?
The euro (EURUSD) weakened after the ZEW report, trading at
$1.3596 from $1.361 ahead of the data.
Elsewhere, France's CAC 40 index lost 0.5% to 4,330.08 while the
U.K.'s FTSE 100 index rose 0.2% to 6,734.89. The pound (GBPUSD)
rallied to $1.7140 in the U.K. after inflation data for June
climbed much more than expected and spurred calls for a rate hike.
At 1.9%, inflation is now inching close to the Bank of England's 2%
target.
"The news will further fuel expectations that the Bank of
England will start rising interest rates sooner rather than later,
with November looking the most likely month for the first hike,"
said Chris Williamson, chief economist at Markit, in a note.
BOE Governor Mark Carney also addressed the speculation on
interest rates at his testimony to the Treasury Select Committee,
saying he doesn't know when the first increase will come, but that
it will be data dependent.
In the U.S., Federal Reserve Chairwoman Janet Yellen will kick
off two days of testimony to Congress later Tuesday. Read: Yellen's
goal before Congress: Sound optimistic -- but not too
optimistic
Among movers in Europe's stock markets, shares of Danone SA in
Paris picked up 2% after Morgan Stanley lifted the food producer to
overweight from equal weight.
Shares of SKF AB put on 1.2% in Stockholm after the ballbearing
maker reported a 7.4% jump in second-quarter profit driven by
higher sales.
Shares of H&M Hennes & Mauritz AB (HNNMY) climbed 1.3%.
The Swedish fashion retailer said total June sales rose 12% on the
year, but that the figure was negatively impacted by calendar
effects of about 3 to 4 percentage points.
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