European stocks fell, sending the Dow Jones Stoxx 50 and 600 indexes to their biggest weekly declines in two months, as the dollar plunged. Companies with US business such as Aegon NV and L'Oreal SA led the drop.
The Stoxx 50 Index shed 1.1 percent to 2255.2 yesterday. The Stoxx 600 fell 0.8 percent. Both indexes have slipped more than 3 percent since last Friday. Insurers paced the week's slide as Morgan Stanley said it may cut forecasts for the industry because of the US currency's fall.
Investors are concerned that economic growth in the region will be stifled as the dollar's slump hurts industries from carmakers to financial services. The dollar lost 3.5 percent this week to US$1.1809 per euro, the lowest since Jan. 5, 1999.
"Usually recovery in Europe starts with exports, but with the dollar slump it gets more difficult for European companies to generate profits in the US and increase their business abroad," said Felix Lanters, who oversees US$7 billion in assets as head of equities at ABN Amro Holding NV in Amsterdam. He favors drug and food-related stocks.
Exports account for a fifth of the gross domestic product of the euro region, according to the EU's statistics office. For every 10 percent drop in the dollar, company earnings are cut by an average 4 percent, Goldman, Sachs & Co estimates.
Benchmark indexes tumbled in all of the 17 Western European markets this week except for Portugal's PSI-20 Index. The UK's FTSE 100 Index shed 1.7 percent, France's CAC 40 Index dropped 3.3 percent and Germany's DAX Index slipped 5.6 percent.
The Amsterdam Exchanges Index led weekly declines, slumping 6 percent. The 25 companies on the AEX made about 38 percent of their combined 2002 sales in the world's largest economy, according to Bloomberg data.
The AEX has dropped 16 percent this year, making it worst-performing of the region's 17 benchmarks.
Aegon slid 7.7 percent yesterday to 7.33 euros and has lost 18 percent since last Friday. ING Groep NV, the biggest Dutch financial-services company, shed 1.9 percent to 12.93 euros, for an 11 percent drop this week.
The Dutch companies have spent a combined US$30 billion to expand in the US in the past decade.
Rob Procter, an analyst at Morgan Stanley, on Wednesday said he will cut his earnings estimates for the whole European insurance industry by at least 2 percent if the average dollar-euro rate this year is US$1.125 or more.
Allianz, Europe's largest insurer, shed 5.1 percent to 58.95 euros and has lost 12 percent since last Friday. JP Morgan Chase & Co yesterday cut the insurer to "neutral" from "overweight." Last year 13 percent of Allianz's premium income came from the US.
L'Oreal, the world's largest cosmetics maker, slid 2.5 percent to 61.35 euros, taking its weekly loss to 3.2 percent. The French company gets almost a third of sales in North America.
Royal Philips Electronics NV shed 1.4 percent to 14.97 euros, for a five-day decline of 9.4 percent. Europe's largest consumer- electronics company on Wednesday said the decline in the dollar is hurting sales at its semiconductor and consumer-electronics businesses.
Bayer AG, a German drugmaker that makes 30 percent of its sales in North America, fell 1.9 percent to 16.80 euros, taking its slide for the week to 7.8 percent.
Elan Corp this week surged 26 percent to 4.86 euros, its highest price since July 2. The Irish drugmaker on Tuesday said it will sell two drugs to US rival King Pharmaceuticals Inc for more than US$750 million after settling a lawsuit.