European stocks dropped for the second week in three after Nokia Oyj, the world's biggest mobile-phone maker, joined the list of companies saying the US dollar's decline against the euro is denting sales.
The Dow Jones Stoxx 50 Index fell by 1.7 percent, the Stoxx 600 by 1.9 percent and the Euro Stoxx 50, a benchmark for the 12 countries sharing the euro, by 2.6 percent.
The dollar lost 3.1 percent against the euro this week, falling to its lowest in a month, after a US government report showed retail sales rose less in August than economists forecast, and consumer confidence declined in September. A weaker dollar lowers the value of European companies' sales in the US and makes their products more expensive for consumers there.
STEADY RISK
"The dollar remains a risk for companies," said Thomas Koerfgen, who helps to manage the equivalent of US$7.3 billion at SEB Invest GmbH in Frankfurt and has recently sold some Nokia stock. "The problem is the rapid movement. Companies could adapt themselves to the lower dollar if they had the security it would stay there. It is certainly a burden on companies."
Earnings fall 5 to 6 percent in Europe for every 10 percent decline in the dollar during a 12-month period, according to Deutsche Bank AG. The region's 300 biggest companies rely on the US for 20 percent of sales, according to HSBC Holdings Plc.
Benchmark indexes fell in 11 of the 17 Western European markets. Germany's DAX dropped 1.7 percent, the UK's FTSE 100 was unchanged and France's CAC slid 0.8 percent. September futures on the Euro Stoxx 50 lost 1.7 percent to 2536.
The Dow Jones Stoxx 50 is up 31 percent since touching its yearly low six months ago. The Stoxx 600 has gained 33 percent during that stretch and the Euro Stoxx 50 has climbed 38 percent.
Stocks extended declines yesterday after the University of Michigan's consumer confidence index for September unexpectedly fell. The index dropped to 88.2, from 89.3 in August. Economics had expected a reading of 90.2, based on the median of 57 forecasts in a Bloomberg News survey.
The US Department of Commerce said retail sales rose 0.6 percent, raising concern about the pace of economic growth.
Economists surveyed by Bloomberg News had forecast a median 1.5 percent increase.
TECH DECLINES
The Stoxx 600 technology index led declines among the 18 industry groups this week. The index had paced the year's gains on optimism an economic recovery in the US would boost earnings of European companies.
Shares of Nokia led the drop on the Stoxx 50 this week, tumbling 7.4 percent. On Tuesday, the Finnish company reiterated a July forecast for mobile-phone revenue to be "flat or slightly down" from a year earlier because of a drop in the dollar and phone prices. The stock fell 0.9 percent to 13.65 euros yesterday.
Siemens AG, the world's fourth-biggest handset maker and a company that generates 25 percent of sales in the US, dropped 5.6 percent this week. The stock slid 1.9 percent to 54.60 euros yesterday.
Heineken NV, the world's third-largest brewer, said on Wednesday that profit will barely grow this year partly as the euro's gain against other currencies hurts revenue. The shares have shed 5.4 percent since Friday last week.
Interbrew SA, the Belgian brewer of Stella Artois and Rolling Rock beer, said on Tuesday that profit will probably fall this year, after the euro's gain against the US dollar and other currencies held back first-half earnings growth. The stock fell 4.3 percent this week.
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