European stocks drift lower as virus spread offsets data showing better economy

European stocks slipped on Friday, as worries about the coronavirus spreading beyond China offset indications the economy is improving.

The Stoxx Europe 600 SXXP, -0.19% fell 0.4% to 428.33, as banks including UniCredit UCG, -3.32% and oil producers including BP BP, -1.93% declined.

The yield on the 10-year German bund TMBMKDE-10Y, +1.67% fell 1 basis point to -0.45%.

U.S. stock futures ES00, -0.38% were weaker as well.

The economic news for Europe showed improving conditions. The IHS Markit flash eurozone manufacturing purchasing managers index rose to a 12-month high of 49.1 in February and the services PMI reached a 2-month high of 52.8, both beating economist forecasts. Any reading below 50 indicates worsening conditions.

“The expansion is being led by welcome resilience in the service sector but manufacturing is also showing encouraging signs of pulling out of the downturn that has plagued producers for over a year, with new orders falling at the slowest rate since late-2018,” said Chris Williamson, chief business economist at IHS Markit.

One caveat to the better numbers was that the PMI was aided by longer delivery times — which typically is a sign of greater demand — but in February was more an indication of supply disruptions stemming from the coronavirus.

South Korea’s government declared a health emergency in its fourth largest city as 100 new virus cases were reported, while China reported another fall in new virus cases.

Of stocks on the move, Pearson PSON, -4.45% fell 4.8% as the educational publisher forecast adjusted operating profit of between £410 million to £490 million, down from £581 million in 2019.

“Pearson has seen a big drop in demand for its printed textbooks in the U.S. and is in the middle of moving to more online provision of educational material. Despite a small rise in the dividend and optimistic talk by the outgoing CEO about the strength of the company’s new digital learning platform, the market is clearly waiting to see some tangible evidence of an improvement in the key North American market,” said Ian Forrest, investment research analyst at The Share Centre.

Allianz ALV, +0.20% rose 0.9% after the German insurer reported a better-than-forecast fourth-quarter profit, helped by its life and health segment. Allianz also increased its dividend by 7% and said it would buy back up to 1.5 billion euros in stock.

Information technology consulting firm Sopra Steria SOP, +7.57% rose 7.2% after reporting a stronger-than-forecast 2019 profit and proposing to buy 94% of Sodifrance SOA, -2.15%, a French IT firm focused on insurance and banking, for 17.10 euros per share, which is a discount to Thursday’s 18.60 euros close.

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