European stocks declined for the first week in five as worse-than-estimated earnings from BASF SE and ABB Ltd raised concern the economic recovery is faltering.
The STOXX Europe 600 Index slid 0.3 percent to 298.91 this week. The benchmark gauge has rallied 4.9 percent so far this month, after its decline last month, which was the first in 13 months. A gauge of expected volatility in euro-area stocks, based on options prices, rose for the first week in three.
“Results in Europe are coming out as unimpressive,” Alberto Espelosin, who helps oversee US$1.5 billion at Abante Asesores Gestion in Madrid, said in a phone interview. “Analysts will still have to pencil in slower growth. Stocks haven’t had a strong correction downwards yet and this could happen any time.”
Analysts have reduced their estimates for annual earnings at companies listed on the STOXX 600 by 7.8 percent since the start of the year, according to data compiled by Bloomberg.
The STOXX 600 plunged 11 percent from May 22 through June 24 amid speculation the US Federal Reserve will begin tapering bond purchases as soon as September. The gauge has rebounded 8.4 percent since then after the Fed and other central banks pledged to continue stimulus measures.
Manufacturing indices based on surveys of purchasing managers rose in the US this month and unexpectedly climbed to a level that signals expansion in the euro area, London-based Markit Economics said this week.
National benchmark indices fell in nine of the 18 Western European markets this week. The UK’s FTSE 100 slipped 1.1 percent, France’s CAC 40 gained 1.1 percent and Germany’s DAX Index dropped 1 percent.
BASF retreated 5.9 percent. The world’s biggest chemical company said second-quarter earnings before interest, taxes and one-time items fell 5.4 percent to 1.83 billion euros (US$2.41 billion). The average estimate of analysts in a Bloomberg survey had called for 1.99 billion euros.
ABB slid 4.7 percent. The largest maker of power transformers posted second-quarter net profit of US$763 million, missing the US$779 million average estimate of analysts surveyed by Bloomberg.