European stocks declined for the fourth week in five as weaker-than-estimated manufacturing output in the US and China plus record unemployment in the euro area signaled that the global economy is slowing.

A gauge of construction and materials stocks tumbled after China's official Xinhua news agency said the country has no plan to begin large-scale stimulus of the economy. Bankia SA, the lender that Spain nationalized last month, plunged 35 per cent as it sought 19 billion euros ($24 billion) of state aid. Logica Plc surged 67 per cent as CGI Group Inc. agreed to buy the computer-services provider.

The Stoxx Europe 600 Index dropped 3.1 per cent to 235.09 this week as all 19 industry groups in the gauge slid more than 1 per cent. The benchmark measure has plunged 14 per cent from this year's high on March 16 amid mounting concern Greece will elect a government that refuses to cut spending and raise taxes, forcing the country to leave the euro. The selloff has left the gauge's valuation at 9.7 times estimated earnings, according to data compiled by Bloomberg.

“Investors are not only worried about Europe,” said Henrik Drusebjerg, a senior strategist at Nordea Bank AB in Copenhagen, where he helps oversee $US230 billion. “They're concerned world growth is abating. The fronts are being formed as the Greek election on June 17 is nearing and more and more rumors go round that Spanish banks will need a massive recapitalization.

US manufacturing slows

In the US, the Institute for Supply Management's factory index fell to 53.5 in May from 54.8 in April. The median forecast of 82 economists surveyed by Bloomberg News had predicted the gauge would drop to 53.8.

A measure of factory production in China, the world's second-largest economy, also slipped. The Chinese Purchasing Managers' Index retreated to 50.4 in May from 53.3 in April, the nation's statistics bureau and logistics federation said. That compared with the median estimate in a Bloomberg News survey of economists for a reading of 52. A reading above 50 indicates expansion.

A separate gauge of manufacturing output from HSBC Holdings Plc and Markit Economics showed a seventh straight contraction, the longest since the global financial crisis.

A gauge of manufacturing output for the 17-nation euro area contracted for a 10th month in May. London-based Markit Economics' PMI declined to 45.1 from 45.9 the previous month. The reading for May was the lowest since June 2009.

Record unemployment

The Stoxx 600 tumbled 1.9 per cent on June 1 as a report showed euro-area unemployment climbed to the highest on record as companies from Spain to Italy to cut jobs.

The jobless rate rose to 11 per cent in April and March, the European Union's statistics office said. That was the highest since the data series started in 1995. The March figure was revised higher to 11 per cent from 10.9 per cent.

The US Labor Department's monthly payrolls release showed that employers added 69,000 in May, fewer than the most- pessimistic forecast in a Bloomberg News survey. Payrolls climbed a revised 77,000 in April, a smaller number than initially estimated. The report also showed that the jobless rate in the world's biggest economy increased to 8.2 per cent last month from 8.1 per cent.

"The data flow has been disappointing,” said Graham Bishop, an equity strategist at Exane BNP Paribas in London. “The relevant thing to look for now is the likelihood of a policy response, rather than the growth outlook, which we know is disappointing.”

National benchmark indexes retreated in every western- European market this week except Greece. Spain's IBEX 35 Index tumbled 7.3 per cent. The U.K.'s FTSE 100 Index slid 1.7 per cent, France's CAC 40 slipped 3.2 per cent and Germany's DAX Index slumped 4.6 per cent.

Saint-Gobain retreats

Cie. de Saint-Gobain SA plummeted 8.4 per cent, its biggest weekly retreat in 2012. FLSmidth & Co. A/S, the Danish supplier of mining equipment, declined 7 per cent. Acciona SA, the Spanish infrastructure developer, sank 9.9 per cent.

“The Chinese government's intention is very clear: it will not roll out another massive stimulus plan to seek high economic growth,” the Xinhua news agency said in the seventh paragraph of a Chinese-language article on economic policy on May 29. “The current efforts for stabilizing growth will not repeat the old way of three years ago.”

Bankia tumbled 33 per cent this week. Banco Popular Espanol SA retreated 12 per cent and Bankinter SA dropped 18 per cent after Standard & Poor's cut the credit ratings of both lenders and Bankia to junk on May 25, after the close of European markets. The rating company cited Spain's weakening economy.

Spain's lenders

Data showed a net 66 billion euros of capital left Spain in March. The country's economy Minister, Luis De Guindos, said the balance-of-payments figures, which showed an outflow of 97 billion euros in the first quarter, didn't reflect “capital flight,” and underlined how Spanish banks were struggling to roll over funding on money markets.

Bayerische Motoren Werke AG, the world's biggest maker of luxury cars, dropped 5.1 per cent and Daimler AG retreated 6.7 per cent as a gauge of automakers sank 4.7 per cent.

ThyssenKrupp AG, Germany's largest steelmaker, declined 9.2 per cent after Chief Executive Officer Heinrich Hiesinger said it would be unrealistic to expect the steelmaker's Americas unit to post an operating profit next fiscal year, Euro am Sonntag reported.

Logica jumped 67 per cent after Montreal-based CGI announced it had reached an agreement to buy the U.K. computer-services provider in a 1.7 billion-pound ($2.5 billion) cash transaction, offering a premium of 59.8 per cent to its closing price on May 30.