European stocks fell for a second week, for the biggest loss since June, amid concern any military action by the US against Syria may escalate into a larger conflict in the Middle East and push up oil prices.
The STOXX Europe 600 Index declined 2.4 percent to 297.32 this week, ending last month with only the second monthly loss since May last year.
The equity benchmark has still rallied 7.9 percent from this year’s low on June 24, as the European Central Bank and the Bank of England pledged to keep interest rates low.
“Syria was a key factor in driving markets lower this week as the threat of a military intervention and the threat of a spike in oil prices tend to be a bad combination for equity investors,” said Andreas Nigg, head of equity and commodity strategy at Vontobel Asset Management in Zurich. “We had a nice summer rally and we are entering the weakest seasonal period from an equity perspective.”
The VSTOXX Index, a gauge of expected volatility in euro-area stocks based on options prices, posted the second-biggest weekly increase since November 2011, jumping 32 percent.
National benchmark indices dropped in all of the 18 Western European markets. Germany’s DAX declined 3.7 percent. The UK’s FTSE 100 slipped 1.2 percent. France’s CAC 40 lost 3.3 percent.
The US Federal Reserve will hold a policy meeting on Sept. 17 and 18 to decide whether to slow the pace of its bond-purchase program. Fed Chairman Ben Bernanke said in May and June that the central bank may consider tapering if the employment outlook improved substantially and the economy grows as forecast.
The issue of the US’ statutory debt ceiling resurfaced with the US Treasury Department saying the nation would exhaust its borrowing limit of US$16.699 trillion in the middle of next month. Congressional Republicans and US President Barack Obama’s administration are gearing up for battles starting early this month over federal spending and borrowing.
ThromboGenics NV plunged 25 percent after its sales forecast missed analysts’ estimates. Serco Group PLC tumbled 12 percent as some of its staff members came under investigation for suspected fraudulent behavior. Vodafone Group PLC jumped 7.6 percent after confirming talks with Verizon Communications Inc to sell its 45 percent stake in Verizon Wireless.