Europe stocks fall after PMI data, Greek downgrade

LONDON (MarketWatch) � European stock markets dropped on Wednesday, as a gauge of business activity in the euro zone unexpectedly signalled contraction in February and Fitch downgraded Greece�s credit rating.

The Stoxx Europe 600 index XX:SXXP �closed 0.8% lower at 264.59, adding to Tuesday�s losses.

On the upside, Peugeot SA FR:UG �jumped 12.1% after the French car maker late Tuesday said that it was in talks on a possible tie-up. It didn�t identify the potential partner, but French newspaper La Tribune said General Motors Co. GM �is the potential ally. Shares of GM were off 1.3% in U.S. trade.

GM said in a statement that it �is routinely talking to others in the industry, but does not have any comment beyond that.� A spokesman from Peugeot was not immediately available to comment.

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Also in Paris, Schneider Electric SA FR:SU �added 6%. The company reported a 5.8% profit rise for 2011, while sales rose 14%. The group said it sees flat growth in 2012.

The French CAC 40 index FR:PX1 �fell 0.5% to 3,447.37, with banks such as Credit Agricole SA FR:ACA �down 3.8% and Societe Generale SA FR:GLE �off 4.4%.

Back to contraction, Greece downgraded

Earlier Wednesday, data showed a surprise fall in private-sector activity in the euro zone.

The preliminary Markit purchasing-managers index fell to 49.7 in February from 50.4 in January. A reading below 50 signals contraction. Economists surveyed by Dow Jones Newswires had forecast a rise to 50.8. Read about euro-zone PMI data.

A flash estimate for the Germany composite output index signaled expansion, although at a slower pace than the seven-month high reached in January. The German DAX 30 index DX:DAX �fell 0.9% to 6,843.87, pulled lower by banks.

Deutsche Bank AG DE:DBK fell 2.4%, and Commerzbank AG DE:CBK �lost 3.3%. Deutsche Lufthansa AG DE:LHA �was off 2.6% as a strike in the airlines� main European hub, Frankfurt, continued Wednesday.

Banks were also pressured amid fresh concerns about Greece.

The Athens General Index GR:GD �tumbled 5.7% to 751.96 after Fitch Ratings cut Greece�s credit rating to C from CCC and reiterated that a bond-swap agreement with private creditors would be a restricted default. Shares of National Bank of Greece SA GR:ETE �sank 12.7%.

Early Tuesday, euro-zone finance ministers approved a 130 billion euros ($172 billion) aid package and a bond swap that will see private bondholders take a write-down of 53.5% on their holdings.

�The Greek deal was a non-deal. There are a lot of things that need to be agreed over the next two weeks,� said Steen Jakobsen, chief economist at Saxo Bank, who said markets are getting nervous about implementation of the deal.