European stocks fell for a fourth week, the longest streak of losses in more than a year, as concern grew that central banks may reduce stimulus measures.
The benchmark Stoxx Europe 600 Index slid 1.5 percent to 291.13 this week, the longest stretch of declines since April last year. The measure has retreated 6.3 percent since US Federal Reserve Chairman Ben Bernanke said on May 22 that the Fed may lower its stimulus measures if the US economy improves sustainably.
“What we’re seeing in the markets now is a correction,” said William de Vijlder, chief investment officer at BNP Paribas Investment Partners. “Before Bernanke spoke, markets were driven by enthusiasm about quantitative easing. The big change is the view on the ground that the most important central bank in the world might do something about its unconventional monetary policy.”
Stocks fell as investors also speculated that the market rally has overshot the earnings outlook.
Shares on the Stoxx 600 rose to 13.5 times estimated earnings on May 17 from nine times in September 2011. That is the highest valuation since the end of 2009.
Stocks on the index traded at 12.9 times projected earnings as of June 14, according to data compiled by Bloomberg.
National benchmark indices fell in 16 of the 18 western European markets this week. The UK’s FTSE 100 lost 1.6 percent. France’s CAC 40 decreased 1.7 percent and Germany’s DAX Index declined 1.5 percent.
Greece became the first developed country to be cut to emerging-market status by MSCI Inc.
The country failed to meet criteria regarding securities borrowing and lending facilities, short selling and transferability, according to an MSCI statement on Tuesday.
The Mediterranean nation’s benchmark ASE Index dropped 6.8 percent this week as politicians wrangled over the closure of the state-controlled broadcaster ERT, renewing concerns about the stability of the Greek government.
Severn Trent slid 15 percent, its biggest weekly drop since October 2008. A bidding group led by Canada’s Borealis Infrastructure Management Inc abandoned a ￡5.3 billion (US$8.3 billion) plan to take over the UK water utility as a deadline expired on Tuesday.
Legrand declined 5.9 percent, the largest weekly decline since June last year. Wendel, France’s biggest publicly-traded investment firm, sold the remaining 14.4 million shares it held in the world’s largest maker of switches, plugs and lighting controls on Tuesday.
Royal Bank of Scotland Group PLC slid 3.5 percent after saying on Wednesday that chief executive officer Stephen Hester is to resign this year.
Kabel Deutschland advanced 11 percent, the biggest weekly gain since at least April 2010, after Vodafone said on Wednesday that it made a “preliminary approach” to discuss acquiring the German cable operator to expand in the broadband and TV markets.
Vodafone is to bid for Kabel within days, Wirtschaftswoche magazine reported on Friday, citing unidentified bankers. The offer would have to exceed 10 billion euros (US$13.3 billion), including debt, according to the report.