Sun, Aug 25, 2013 - Page 15 News List

European markets plunge as investors look to Fed moves

Bloomberg

European stocks posted their biggest weekly loss in two months amid concern that the US Federal Reserve would reduce the pace of its monthly bond purchases next month.

Heineken NV fell 5.2 percent after the world’s third-largest brewer said that profit before some items would not grow this year. Deutsche Wohnen AG sank after it offered to buy Berlin’s biggest publicly traded residential landlord in an all- share transaction.

The STOXX Europe 600 Index slid 0.5 percent to 304.71 this week. The gauge dropped 1.9 percent in the three days through Wednesday, as the MSCI Emerging Markets Index plunged 3.5 percent and speculation mounted that the minutes from the Fed’s last meeting would give more details of how the central bank would slow its quantitative-easing program.

The equity benchmark is still up 11 percent from this year’s low on June 24, as the European Central Bank said that its interest rates will remain low for an extended period of time.

“The weakness in the first three days really was led by emerging markets,” said David Moss, who helps manage US$144 billion as director of European equities at F&C Investments in London. “European markets have been pretty strong of late and the weakness we saw in the emerging markets has been used as a bit of an excuse for profit-taking.”

The Fed published the minutes from its July 30 to 31 meeting on Wednesday. They showed that almost all the participants agreed with Fed Chairman Ben Bernanke’s plan to start reducing its US$85 billion monthly bond purchases if the economy continues to improve in line with forecasts.

Policymakers will probably decide to buy fewer assets next month, according to 65 percent of economists surveyed by Bloomberg on Aug. 9 to 13. The Federal Open Market Committee (FOMC) holds its next two-day meeting on Sept. 17 and 18.

“The FOMC minutes didn’t tell us anything we didn’t know, but certainly the advent of tapering, whenever that may be, is at the front of people’s minds,” Moss said.

In Europe, a measure of German manufacturing compiled by Markit Economics climbed to 52 this month from 50.7 last month. The median economist estimate in a Bloomberg survey had called for a reading of 51.1. The company’s gauge of services advanced to 52.4, beating the median estimate of 51.7. Readings greater than 50 mean that activity increased.

National benchmark indices declined in 13 of the 18 Western-European markets this week. The UK’s FTSE 100 slipped 0.1 percent and France’s CAC 40 lost 1.3 percent. Germany’s DAX Index added 0.3 percent.

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