European stocks fell in a week shortened by the Christmas holiday on increasing signs the deteriorating global economy is choking earnings.
Volkswagen AG, the region’s largest carmaker, sank more than 9 percent after Japan’s Toyota Motor Corp forecast its first operating loss in 71 years. Michelin & Cie fell 4.3 percent as the French tiremaker said it will cut back production at most plants. Marks & Spencer Group Plc led losses among UK retailers after an analyst said the industry had the worst Christmas for “many years.”
The MSCI Europe Index retreated 2 percent on the week to 67.43, bringing its decline this year to 47 percent, as credit losses and writedowns at the world’s largest banks surpassed US$1 trillion and the US, Europe and Japan entered the first simultaneous recessions since World War II. That is the biggest annual decline on record for the European benchmark.
“A bit of air was expected at the end of the year and it’s not coming,” said Roland Lescure, who manages the equivalent of US$128 billion as chief investment officer of Groupama Asset Management in Paris. “The increase in financing costs and the recession weighing on sales are two negative factors for stocks.”
Germany’s benchmark DAX dropped 1.4 percent. The UK’s FTSE 100 decreased 1.6 percent. France’s CAC 40 fell 3.4 percent.
Analysts have slashed their European earnings forecasts, predicting a 16 percent drop in full-year profits at STOXX 600 companies, according to Bloomberg data. That compares with 11 percent growth estimated at the start of the year.
Siemens AG, Europe’s largest engineering company, slipped 2.3 percent to 50.83 euros as European industrial orders fell by the most on record in October. Industrial orders in the 15-nation euro area plunged 15.1 percent from the year-earlier month, the most since the European currency was introduced in 1999, the EU statistics office showed on Monday.
Separately, Siemens lost a patent-infringement trial against Seagate Technology in which it was demanding US$160 million over technology used to read computer data.
Volkswagen, Europe’s largest automaker, slid 9.1 percent to 260 euros. PSA Peugeot Citroen, the region’s second-biggest, fell 5.4 percent to 11.40 euros.
Michelin, the world’s second-largest tiremaker, said on Monday it would cut production at most plants after demand declined in all markets. Its shares dropped 4.3 percent to 35.58 euros this week.
Top-ranked tiremaker Bridgestone Corp the same day slashed its full-year profit forecast by 82 percent.
Continental AG stock tendered to buyer Schaeffler Group rose 19 percent to 71.15 euros after EU antitrust regulators approved the 12.7 billion euro (US$18 billion) takeover of the region’s second-largest car-parts maker.
The stock still trades below the 75 euros a share that Schaeffler offered.
Freely traded Continental shares fell 20 percent to 29.82 euros as the stock was removed from Germany’s benchmark DAX Index.