European stocks posted their biggest weekly decline since June as concern that the latest round of bond buying in the US would fail to encourage growth offset speculation China might announce further stimulus measures.
Volkswagen AG led automakers lower after forecasting tougher business conditions for the second half. Fomento de Construccion & Contratas plunged 15 percent, pacing a drop in Spanish construction companies. Infineon Technologies AG slid after predicting sales and profitability would decline. Telekom Austria AG sank after cutting its dividend.
The STOXX Europe 600 fell 2.7 percent to 268.48 this week. Still, the benchmark measure was up 6.9 percent this quarter, as European Central Bank policymakers approved a plan to buy the bonds of the most-indebted members of the euro area. The index added 0.9 percent this month, for a fourth straight monthly gain.
“There are elements of political risk,” said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “Fundamentals remain weak and there is still pressure on economic growth. We have a rather negative outlook.”
US Federal Reserve Bank of Philadelphia president Charles Plosser said on Tuesday that the Fed’s latest round of quantitative easing could jeopardize the central bank’s credibility. The Federal Open Market Committee said on Sept. 13 that it would buy mortgage-backed securities at a pace of US$40 billion per month until the labor market improves.
A report on Thursday showed China’s industrial profits fell for a fifth month last month, increasing speculation the government would do more to support economic growth. China may further cut banks’ reserve requirements or interest rates if external demand worsens, Chen Yulu, an academic adviser to the People’s Bank of China, told reporters in Beijing.
Spain’s Cabinet on Thursday approved the budget for next year, with Prime Minister Mariano Rajoy vowing to cut the deficit by at least 18 billion euros (US$23.1 billion) , defying tens of thousands of demonstrators who fought with police in Madrid this week to demand Rajoy reverse course and resign.
National benchmark indexes slid in all of Europe’s 18 western markets. France’s CAC 40 Index dropped 5 percent, the UK’s FTSE 100 fell 1.9 percent and Germany’s DAX Index retreated 3.2 percent.