Europe ends lower on PMI data, China

LONDON (MarketWatch) � European stock markets declined Monday, led lower by banks and miners as data showed euro-zone business activity contracted more than initially thought in February and China cut its economic growth target.

The Stoxx Europe 600 index XX:SXXP �closed 0.6% lower at 265.56. Salzgitter AG DE:SZG �was among the biggest decliners, falling 5.4% after the steel and technology firm reported an 18.6% increase in 2011 revenue, but said a repeat of the 2011 results would be �challenging� in 2012.

European stocks headed south as the Markit euro-zone composite purchasing managers index fell to 49.3 in February from 50.4 in January, below a preliminary estimate of 49.7. A reading below 50 indicates contraction in private-sector business activity.

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�The recent rally has been based on liquidity and [U.S. Federal Reserve Chairman Ben] Bernanke didn�t mention QE3 [a third round of quantitative easing] last week because the economy is a little better. That means less fiscal stimulus and less liquidity in the market,� said Philippe Gijsels, head of research at BNP Paribas Fortis Global Investors. �Going forward the market has to move higher on economic data and with less liquidity and mixed economic data at the moment this (PMI data) is a good excuse to take profits.�

Italy and Spain both contracted faster in February than in January, suggesting that growth for those countries looks to be a long way off. Read about euro-zone PMI.

�It�s too early to call a reversal on the uptrend in the recovery in Europe. The crucial point is the beginning of summer and if we�re still in trouble in June/July, markets will move away from its optimistic view,� Gijsels said.

The Spanish IBEX 35 index XX:IBEX declined 1.3% to 8,453.50, weighed by the country�s banks.

BBVA SA ES:BBVA �pulled 1.8% lower, Banco Santander SA ES:SAN �lost 2%, CaixaBank SA ES:CABK �shed 1.3%, while Banco de Sabadell SA ES:SAB �was 2.6% lower.

In the secondary market, yields on 10-year Spanish government bonds ES:10YR_ESP �added 6 basis points to 4.95%.

Italy�s FTSE MIB index XX:I945 �closed 0.7% lower at 16,787.15, pressured by Banco Popolare SC IT:BP ,�off 1.3%, Unione di Banche Italiane SCpA IT:UBI ,�down 1.3% and Banca Popolare dell�Emilia Romagna SCARL IT:BPE �3.1% lower.

Yields on 10-year Italian government bonds IT:10YR_ITA �rose 9 basis points to 4.93% in the secondary market.

Germany�s composite PMI fell to a two-month low of 53.2 in February, adding pressure to the German DAX 30 indexDX:DAX , which was off 0.8% at 6,866.46.

Among biggest decliners in the index, Commerzbank AG DE:CBK lost 3.3% and Deutsche Bank AG DE:DBK was down 2%.

Further weighing on the DAX, HeidelbergCement AG DE:HEI �lost 3.6%, after ING downgraded the stock to hold from buy on the back of a 50% rally since September 2011.