European stocks posted a second weekly loss, their first back-to-back decline in two months, as investor demand for equities waned before Christmas holidays and concern rose over a US Federal Reserve meeting next week on stimulus measures.
PSA Peugeot Citroen completed the biggest weekly slump since 2008 after disclosing a US$1.5 billion charge and as General Motors Co sold its entire stake in the French carmaker. RSA Insurance Group PLC slid 9.1 percent after CEO Simon Lee resigned amid an accounting probe that raised questions about internal controls at the insurer. John Wood Group PLC tumbled 9.6 percent after saying earnings next year at its engineering group may decrease by about 15 percent.
The STOXX Europe 600 Index fell 2.1 percent to 309.75 this week, with mean daily trading plunging 14 percent from this year’s average volume. The gauge has dropped 4.7 percent this month, trimming this year’s gains to 11 percent, as better-than- estimated US economic data led some investors to speculate the Fed will decide to slow bond purchases as early as next week. The Euro STOXX 50 Index of euro-area stocks lost 2 percent this week.
“These markets are running on fumes,” Michael Ingram, a market strategist at BGC Partners LP in London, said by phone. “There’s no real volume and no real conviction. Most money managers have basically shut up shop for the year. They’ve made decent money this year. People don’t want to mess up their performance by trying something in December.”
National benchmark indices retreated in all 18 Western European markets except for Iceland this week. Germany’s DAX fell 1.8 percent. France’s CAC 40 dropped 1.7 percent. The UK’s FTSE 100 lost 1.7 percent for its sixth consecutive weekly decline.
A majority of investors still believe the Fed will start to reduce US$85 billion a month of bond purchases only next year. Even so, 34 percent of economists surveyed by Bloomberg on Dec. 6 predicted the US central bank would decide to taper stimulus measures at its meetings on Tuesday and Wednesday. That proportion is higher than the 17 percent of respondents who said so in a Nov. 8 poll.
The US House of Representatives on Thursday passed the first bipartisan budget in four years and the Senate will review it next week. The plan will reduce the scope of automatic spending cuts by US$63 billion, sparing the federal government another shutdown like the one it experienced in October.