European stocks ended an otherwise strong month on the downside Thursday, weighed by weakness in banking and oil and as a number of downbeat economic data and corporate news dented sentiment.
The Stoxx Europe 600 index dropped 0.5% to 287.22, adding to a 0.6% loss from Wednesday. For the month, the index gained 2.7%, marking the strongest monthly performance since July.
The U.K.'s FTSE 100 index lost 0.7% to 6276.88 but jumped 6.4% for January. Germany's DAX retreated 0.5% to 7776.05, trimming its monthly gain to 2.2%. France's CAC-40 shed 0.9% to 3732.60 but gained 2.5% on the month.
"The pace of the gains over the past month has created an element of nervousness and that's a factor that has been sitting on the market for the last couple of days," said Keith Bowman, equity analyst at Hargreaves Lansdown.
"We've had some worries from yesterday's [U.S.] GDP numbers and investors are still mulling that over. At the same time they are looking toward nonfarm payrolls due tomorrow to provide a firmer figure," he said.
U.S. investors also hit the pause button on January's rally, and Facebook shares struggled after its earnings report, falling 2.9%. The stock received at least four analyst downgrades.
Midday in New York, the Dow Jones Industrial Average pulled back 28 points, or 0.2%, to 13882. Still, it was on track to notch its best start to the year since 1997. The Standard & Poor's 500-stock index declined four points, or 0.3%, to 1498 and the Nasdaq Composite Index lost three points, or 0.1%, to 3139.
The broader European market briefly trimmed losses in late-session action, after the Chicago purchasing managers' index rose to the highest level since April 2012. Meanwhile, the U.S. Labor Department said the number of people applying for jobless benefits jumped by 38,000 last week to 368,000, marking the biggest increase since the week after Superstorm Sandy.
In Europe, German unemployment rose above three million people in January, taking the number of unemployed to the highest level since March 2011. However, the jobless rate declined to 6.8% from 6.9% the previous month, below forecasts.
The euro zone's largest economy also posted a sharp drop in retail sales in December, falling 1.7% on the month and 4.7% on the year, stoking fears that the currency area's growth engine may be stalling.
Still, consumer price inflation slowed to 1.7% in January, potentially giving the European Central Bank more room to cut interest rates again.
In market action, Ericsson LM posted some of the biggest gains, rising 7.6% after the telecom-equipment supplier said it expects profitability to improve in the second half of 2013.
On the downside, AstraZeneca sank 3.2%. The U.K. drug maker warned in its quarterly earnings report that sharp declines in revenue and earnings would continue through 2013 after it lost patents on key drugs.
Most bank shares were also under pressure. Royal Bank of Scotland Group shed 1.1%, while HSBC Holdings gave up 1%. The U.K. Financial Services Authority ordered the four largest banks by assets to pay out compensation to small-business customers because of how they marketed products to reduce interest-rate risks.
Cr�dit Agricole fell 1.5% and Commerzbank ended 0.9% lower.
Banco Santander gave up 3.5% after its fourth-quarter earnings missed analyst expectations and net-interest income declined from a year earlier. Spain's IBEX 35 index slumped 2.5% to 8362.30 but gained 2.4% on the month.
The oil sector was under pressure after Royal Dutch Shell slid 2.9%. It posted fourth-quarter results below expectations.
Infineon Technologies jumped 3.9%, after the chip maker backed its fiscal year outlook, even as first-quarter revenue missed market expectations.
In currency markets, the euro was fetching $1.3585 by close of the European session, from $1.3567 late Wednesday in New York. The dollar was at �91.23 from �91.09.
Among commodities, light, sweet, crude for March delivery was down 73 cents at $97.21 a barrel on the New York Mercantile Exchange by the close of European equity markets. Most actively traded gold for April delivery on the Comex division was down $20.50 at $1,659.70 a troy ounce.
Write to Nina Bains at nina.bains@dowjones.com
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