European stocks declined for a second week as higher oil dimmed the earnings outlook for automakers and retailers and concerns deepened that banks will report more losses.
Bayerische Motoren Werke AG and Carrefour SA, the world’s second-largest retailer, declined more than 3 percent as oil soared as much as US$8.27 a barrel this week. Anglo Irish Bank Plc led a retreat in financial shares as Citigroup Inc predicted three US investment banks will write down a combined US$6.4 billion this quarter and speculation mounted that a government bailout of Fannie Mae and Freddie Mac would leave the shares worthless.
The Dow Jones Stoxx 600 Index lost 1.2 percent to 283.82 this week, extending its slump this year to 22 percent. Financial firms have led the decline on concerns that accelerating inflation and more than US$500 billion in credit-related losses will stifle profits.
“After all the bad things we’ve had this week, the oil price is shaking the market again,” said Roger Kunz, head of investment strategy at Clariden Leu in Zurich, Switzerland, which manages the equivalent of US$120 billion in assets. “Markets are extremely nervous at the moment. That’s why they react very negatively, because the situation remains very fragile.”
National benchmark indexes declined in 15 of the 18 western European markets. Germany’s DAX slipped 1.6 percent and France’s CAC 40 fell 1.2 percent. A rally in commodity producers sent the UK’s FTSE 100 0.9 percent higher.
BMW, the world’s largest maker of luxury cars, fell 3.2 percent while Porsche SE, the maker of the 911 sports car, retreated 2.4 percent. Carrefour lost 5.6 percent and Metro AG, Germany’s largest retailer, slid 5 percent.
Crude oil rose as much as 7.3 percent this week in New York as a weakening dollar revived demand for raw materials as alternative investments. The Reuters/Jefferies CRB Index of 19 commodities soared 3.7 percent to a three-week high of 405.92 in New York on Thursday.
Anglo Irish, Ireland’s third-largest lender by market value, lost 15 percent while Royal Bank of Scotland Plc, the UK’s second- biggest bank, fell 5.2 percent. The Dow Jones Stoxx Banks Index dropped 4 percent this week, extending its slump this year to 32 percent.
Citigroup analyst Prashant Bhatia cut his third-quarter earnings estimates for Lehman Brothers Holdings Inc, Goldman Sachs Group Inc and Morgan Stanley. Separately, JPMorgan Chase & Co said Lehman may write down about US$4 billion in credit-related investments this quarter as the mortgage market deteriorates.
Billionaire Warren Buffett told CNBC that Fannie Mae and Freddie Mac “don’t have any net worth.”
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