European stocks declined for a second week, trimming their biggest monthly rally since January, amid concern the US Federal Reserve would start to taper its debt-buying program as the US economy strengthens.
The STOXX Europe 600 Index lost 0.8 percent to 300.88 this week, led by a selloff in real estate, food and healthcare companies. The gauge still gained 1.4 percent last month, climbing to its highest level since June 2008 on May 22. The STOXX 600 has advanced for 12 consecutive months, the longest winning streak since 1997.
“We are in a bull market for equities and this will continue,” Geoffroy Goenen, of Dexia Asset Management in Brussels, said in a phone interview. “The day that the Fed reduces the size of its bond purchases, the market will stop and look. If the economy can continue to grow, then the market will continue to go up.”
The yield on benchmark 10-year US debt climbed to as much as 2.23 percent this week, the highest level in 12 months, after economic data and low demand at a government auction of two-year notes added to concerns about the longevity of the Fed’s bond- purchasing program.
Fed Chairman Ben Bernanke last week said the central bank may cut the pace of buying “in the next few meetings” if economic conditions improve.
A report from the Conference Board on Tuesday US consumer confidence climbed to 76.2 last month, the highest level since February 2008. Separate data showed the S&P/Case-Shiller house-price index gained 1.1 percent in March, compared with the 1 percent average projection of economists in a Bloomberg News survey. That means house prices have climbed 10.9 percent from a year earlier, their biggest jump since April 2006.
Another report on Friday showed business activity rebounded last month after declining for the first time in more than three years last month. The MNI Chicago Report’s business barometer rose to 58.7, exceeding all forecasts in a Bloomberg survey. A reading greater than 50 signals expansion.
Fourteen of the 18 Western European benchmarks declined this week. France’s CAC 40 lost 0.2 percent, and the UK’s FTSE 100 Index retreated 1.1 percent in a four-day week. Germany’s DAX Index rose 0.5 percent.
KPN led telecom firms lower, retreating 8.9 percent. Kepler Cheuvreux downgraded the Dutch phone operator to reduce, the equivalent of a sell rating, saying its financial situation is still fragile.
Deutsche Telekom AG, Germany’s biggest phone company, fell 4.6 percent after setting the ratio for a scrip dividend at 12.5 rights for each new share with a deadline of June 3.
H&M dropped 2.7 percent as Goldman Sachs Group Inc lowered its rating for the company to sell, saying profitability at Europe’s second-largest clothing retailer will suffer as customers shift to online shopping.