By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- Germany's benchmark stock index tumbled
on Friday, marking a third straight day of losses, as investors
continued to worry about the fallout from the tougher sanctions on
Russia.
Russia and Germany have close trading ties, and some 25% of
Germany's energy needs come from Russian gas, oil and coal
imports.
"The sanctions will have a much bigger impact on Germany than
most other markets," said Peter Dixon, strategist for
Commerzbank.
Market moves: Germany's DAX 30 index dropped 2.1% to close at
9,210.08. For the week, the benchmark slid 4.5%, the biggest weekly
loss in two years.
Shares of Adidas AG gave up 1.8% after Deutsche Bank cut the
company to sell from hold, and J.P. Morgan Cazenove downgraded it
to neutral from overweight. On Thursday, the stock plunged after
the sportswear retailer cut its 2014 outlook in part because of
risks surrounding Russia.
Among other major movers in Germany, shares of chemicals company
Linde AG lost 3.8%, E.ON SE dropped 3.8% and Bayer AG shed
3.2%.
The pan-European Stoxx Europe 600 index slid 1.2% to 331.91,
closing at the lowest level since April and losing 2.9% on the
week. Read: ArcelorMittal, Iliad slump in Europe; AXA climbs
France's CAC 40 index dropped 1% to 4,202.78. The benchmark
closed 3% lower for the week.
The U.K.'s FTSE 100 index gave up 0.8% to 6,679.18, for a 1.7%
weekly drop. The pound (GBPUSD) dropped 0.4% against the dollar to
$1.6832, its lowest trading level in seven weeks. The sterling
weakness came after a disappointing report on the U.K.'s
manufacturing sector.
Data and events: The downbeat trading day in Europe came against
a background of several downbeat events: mixed macroeconomic data,
the collapse of the 72-hour cease-fire in Gaza, and continued
concerns about the fallout from the tougher sanctions on Russia. A
number of prominent European companies, such as Société Générale SA
and Adidas AG , have already warned on the potential impact of
Russia-related risks.
The main data release on Friday was the U.S. nonfarm-payrolls
report, which said 209,000 jobs were added to the economy in July,
falling short of estimates of a 235,000 print. Wages barely grew,
easing pressure on the Federal Reserve to raise interest rates. One
reason the Fed is currently holding off from hiking rates is
lackluster wage growth. Read: What to watch in July jobs report:
Growth, wages and hours
In Europe on Friday, Markit said the final euro-zone
manufacturing purchasing managers index held steady at a
seven-month low in July, with France among the weakest
countries.
And in the U.K., the manufacturing PMI showed the sector slowed
more than expected in July and expanded at the slowest pace in a
year.
Comments: With some hefty weekly losses this week for benchmarks
on both sides of the Atlantic, "the only question now is whether
what we're seeing is the early stages of a broader correction or
simply a brief selloff prompted by a number of small factors
feeding into people's fear that a big correction must be round the
corner," said Craig Erlam, market analyst at Alpari UK, in a
note.
And more specifically for German stocks -- which are at their
lowest level since mid-April -- the DAX has "made a definitive
breakdown from its March uptrend and left the 200-day moving
average fall behind at 9580," according to Mike van Dulken, head of
research at Accendo Markets. He noted the index could fall all the
way to a 2014 low around 8,910.
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