European stocks fell for a fifth week, completing the longest losing streak since January, as concern deepened that record oil prices and slowing economic growth will hurt profits.
ArcelorMittal, the world’s largest steelmaker, and Lonmin PLC paced a retreat in basic-resources companies, sending a measure for the industry to its worst week in more than two months. TUI Travel Plc, Europe’s largest tour operator, and Iberia Lineas Aereas de Espana SA slipped as oil rose above US$145 a barrel for the first time. Marks & Spencer Group PLC, suffering from a slump in UK consumer spending, led retail stocks lower after reporting the steepest sales decline since 2005.
Europe’s Dow Jones STOXX 600 Index sank 2.7 percent to 279.53. Stocks have retreated worldwide this year, erasing almost US$11 trillion from global equity markets, on concern credit-related losses topping US$400 billion, record oil and accelerating inflation will force central banks to raise borrowing costs.
“Inflation continues to weigh on markets, clouding the outlook for earnings and economic growth,” said Christoph Berger, who helps oversee almost US$100 billion as a fund manager at Cominvest Asset Management in Frankfurt. “Economic headwinds bear risks for the market.”
European Central Bank President Jean-Claude Trichet played down prospects of higher interest rates, saying the quarter-point rise to 4.25 percent on Thursday would help bring inflation back below 2 percent. Trichet said he has “no bias” on further moves.
National benchmarks declined in all 18 western European markets. Germany’s DAX Index fell 2.3 percent, and France’s CAC 40 retreated 3 percent. The UK’s FTSE 100 decreased 2.1 percent. The STOXX 50 slipped 1.3 percent, and the Euro STOXX 50, a measure for the euro region, lost 2 percent.
Earnings for companies in the STOXX 600 are expected to drop 2 percent this year, compared with 11 percent growth forecast at the end of last year, according to data compiled by Bloomberg.
“There has been a shift in the market’s focus away from the credit crunch in March, towards oil and inflation,” Bernd Meyer, head of pan-European equity strategy at Deutsche Bank AG in London, said in a Bloomberg Television interview.
ArcelorMittal fell 16 percent and Lonmin, the world’s third-biggest platinum producer, retreated 15 percent. The STOXX Basic Resource Index sank 8.5 percent, the steepest drop since the week ended March 21 and the worst performance among 18 industry groups.
ArcelorMittal said on Tuesday that about half its US customers refused to pay a US$250-a-tonne surcharge that was added in May to make up for soaring raw-material costs.
Eramet SA, operator of the world’s largest ferronickel plant, plunged 19 percent. Challenges magazine reported on Thursday the Duval family, its main shareholder, has been selling shares.
TUI Travel sank 13 percent and Iberia, Spain’s largest airline, tumbled 22 percent. Thomas Cook Group PLC, Europe’s second-biggest travel company, fell 11 percent, and Air France-KLM Group, the largest European airline, slipped 8.3 percent.
Jet-fuel prices in northwest Europe increased 5.3 percent this week, bringing the advance for this year to 59 percent, Bloomberg data show.
Marks & Spencer fell 32 percent this week. Sales at UK outlets open at least a year slid 5.3 percent in the 13 weeks ended June 28. A 4.5 percent decline in same-store sales of food was the biggest drop since at least 1998. Marks & Spencer lost market share in food after Tesco PLC and Wal-Mart Stores Inc’s Asda reduced prices, in what executive chairman Stuart Rose said was “the biggest price war we’ve probably had in the last 20 years.” Conditions won’t improve for two years, he said.
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