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Euro Economic Worries Spook Investors

Markets in the U.S. and Europe reverse course after Tuesday's rally.

The European stock rally, which was fed by stronger economic reports Monday, turned out to be extremely short lived as a raft of discouraging news from the Euro zone pressured markets on both sides of the Atlantic.

 

In Europe, Milan’s FTSE MIB was the only market on the upswing, closing ahead 0.2 percent at 14,870.42. The FTSE 100 led the downward movement, falling 0.5 percent to 5,670.82, while the CAC 40 in Paris and the DAX in Frankfurt each sank 0.2 percent, to 3,204.83 and 6,152.34, respectively.

 

Most retail and luxury stocks took a tumble, with the day’s biggest losers including Hugo Boss, which retreated 4.6 percent to 60.65 euros; Metro, which fell 3.3 percent to 28.35 euros, and Hermes, which sank 2.2 percent to 239.85 euros. The euro traded at $1.27.

 

The U.K. trade deficit grew more than expected in November, while Europe’s biggest economy Germany most likely contracted in the same month, according to government statistics from the two countries.

 

An estimate of German growth in the fourth quarter shows the economy may have shrunk by 0.25 percent, with recession in the country still a possibility. Official figures are due out next month.

 

And the head of sovereign ratings for Fitch Ratings told European investors on Wednesday that the European Central Bank should buy more Euro zone debt to support Italy and prevent a “cataclysmic” end to the euro, Reuters reported.

 

In midafternoon trading on Wall Street, the S&P Retail Index was down 0.2 percent, or 1.01 points, to 532.98, and the Dow Jones Industrial Average was off 8.63 points to 12,453.84.

 

Among the firms moving sharply down were, Delta Apparel Inc., which fell 21.7 percent to $15.03 after warning it would write down the value of its inventory given changes in cotton prices; Urban Outfitters, Inc., which fell 17.3 percent to $24.33 following the departure of chief executive officer Glen Senk, and Coldwater Creek Inc., which fell 14.1 percent to 89 cents.