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 eurozone signaled that the global economy is slowing.
A gauge of construction and materials stocks tumbled after China’s Xinhua news agency said the country had no plan to begin large-scale stimulus of the economy.
Bankia SA, the lender that Spain nationalized last month, plunged 35 percent as it sought 19 billion euros (US$23.5 billion) of state aid. Logica PLC surged 67 percent as CGI Group Inc agreed to buy the computer-services provider.
The STOXX Europe 600 Index dropped 3.1 percent to 235.09 this past week as all 19 industry groups in the gauge slid more than 1 percent. The benchmark measure has plunged 14 percent 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 US$230 billion. “They are 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.
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 eurozone contracted for a 10th month last month. London-based Markit Economics’ PMI declined to 45.1 from 45.9 the previous month. The reading for last month was the lowest since June 2009.
The STOXX 600 tumbled 1.9 percent on Friday as a report showed eurozone unemployment climbed to the highest on record as companies from Spain to Italy cut jobs.
The jobless rate rose to 11 percent in April and March, the EU’s statistics office said, the highest since the data series started in 1995. The March figure was revised higher to 11 percent from 10.9 percent.
National benchmark indexes retreated in every Western-European market this week except Greece. Spain’s IBEX 35 tumbled 7.3 percent. The UK’s FTSE 100 Index slid 1.7 percent, France’s CAC 40 slipped 3.2 percent and Germany’s DAX slumped 4.6 percent.
Data showed a net 66 billion euros of capital left Spain in March. Spanish Minister of Economy and Finance Luis De Guindos said the balance-of-payments figures, which showed an outflow of 97 billion euros in the first quarter, did not reflect “capital flight,” and underlined how Spanish banks were struggling to roll over funding on money markets.