European stocks fell this week on investor concern about Greece’s ability to implement austerity measures needed for a second rescue package, and as the European Commission said the euro area’s economy would shrink this year.
The STOXX Europe 600 slipped 0.4 percent to 264.77 this week after reaching 268.16 on Monday, the gauge’s highest level since July 26. The benchmark measure has rallied 23 percent from its low on Sept. 22 and 8.3 percent this year as investors speculated euro-area policymakers will contain the sovereign-debt crisis.
“Investors have been hesitant as European politicians face parliamentary votes to pass the bailout for Greece, which also faces another general election in April,” said Hans Peterson, global head of investment strategy at SEB Private Banking in Stockholm. “Markets are in a waiting position.”
Euro-area finance ministers this week approved a 130 billion euro (US$173.8 billion) aid package for Greece and persuaded investors to provide more debt relief to the nation.
German Chancellor Angela Merkel indicated she would maintain pressure on Athens to meet debt-cutting pledges required for its second financial rescue, saying fiscal discipline was needed to hold the euro area together.
Still, the second rescue package may not be enough to end the debt crisis, Bank of England Deputy Governor Charlie Bean said on Wednesday in a speech in Glasgow, Scotland.
While the agreement “is certainly welcome, there still remains a possibility that events could unfold in a disorderly and damaging fashion at some stage in the future,” he said.
On Thursday, stocks slipped after the European Commission said the 17-nation euro economy would contract 0.3 percent this year, abandoning a November forecast for 0.5 percent growth, as the commission expected the economies of Italy and Spain to shrink 1.3 percent and 1 percent respectively.
“Although growth has stalled, we are seeing signs of stabilization in the European economy,” EU Economic and Monetary Commissioner Olli Rehn said in the introduction to the quarterly forecasts. “Economic sentiment is still at low levels, but stress in financial markets is easing.”
Thirteen of the 19 industry groups in the STOXX 600 declined this week, led by a gauge of travel and leisure companies, which fell 2.9 percent. Tour operators and airlines face rising fuel costs.
National benchmark indexes fell in nine of the 18 western European markets. France’s CAC 40 Index gained 0.8 percent. Germany’s DAX Index rose 0.8 percent and the UK’s FTSE 100 Index increased 0.5 percent.
Of the 216 companies on the STOXX 600 that have reported quarterly earnings so far, 108 have missed analyst estimates, while 92 have surpassed them, data compiled by Bloomberg show.