European stocks fell, capping their third consecutive weekly decline, after Bear Stearns Cos needed to get emergency funding from the Federal Reserve and JPMorgan Chase & Co.
UBS AG, Europe's largest bank by assets, fell the most in a month in Zurich, while Deutsche Bank AG and HSBC Holdings Plc also declined after Bear Stearns said its cash position had "significantly deteriorated." Tesco Plc led a retreat by UK retailers after Goldman Sachs Group Inc downgraded the shares, citing "stagflation" concerns.
The Dow Jones STOXX 600 Index dropped 3.11, or 1 percent, to 304.15, extending its weekly decline to 1.2 percent. The regional measure has fallen 17 percent this year on concern losses stemming from the collapse of the US subprime-mortgage market will curb profit growth.
"We're going to see more turmoil," said Felix Lanters, head of portfolio management at Theodoor Gilissen Bankiers in Amsterdam, which oversees US$13 billion. "There is fear that we are going to see a real casualty and Bear Stearns seems to be close to the limits."
National benchmarks retreated in 15 of 18 markets in western Europe. Germany's DAX and France's CAC decreased 0.8 percent, while the UK's FTSE 100 slipped 1.1 percent. The STOXX 50 lost 1.3 percent while the Euro STOXX 50, a measure for the euro zone, fell 0.9 percent.
UBS, Europe's biggest bank by assets, dropped 7.4 percent to 28.44 Swiss francs (US$28.14). Deutsche Bank, Germany's largest bank, lost 1.8 percent to 69.99 euros (US$109). HSBC fell 1.9 percent to £7.625.
"The concern with Bear Stearns is they started talking about a deterioration in liquidity," said Simon Melluish, who helps oversee about US$4 billion at Gartmore Investment Management in London. "They are big prime brokers."
Tesco shed 3.4 percent after Goldman Sachs downgraded the shares to "sell" from "neutral." William Morrison Supermarkets Plc, the smallest of the four main UK supermarket chains, retreated 3.9 percent. Goldman cut the shares to "neutral" from "buy."
Earnings for companies in the STOXX 600 Index will probably rise only 3.5 percent this year, down from 11 percent predicted at the end of last year, Bloomberg data show.
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