European stocks fell for a fifth straight day on Friday sending the Dow Jones STOXX 600 Index to the lowest level in two months, as concern deepened the global economic slump will erode earnings.
Prudential Plc, the second-largest life-insurance company in the UK, retreated 8.2 percent amid speculation insurers may run short of funds. Infineon Technologies AG, Europe’s second-biggest semiconductor maker, sank 4.9 percent as its Qimonda unit filed for insolvency. Ubisoft Entertainment SA slumped 19 percent after revising its sales forecast. BHP Billiton Ltd climbed 2 percent, leading a rebound in raw-material shares, as metals rallied.
The STOXX 600 dropped 0.4 percent to 182.20 as of 4:30pm in London, the lowest since Nov. 21. Disappointing earnings from Nokia Oyj to Microsoft Corp and concern banks may need to raise more capital to shore up their balance sheets has sent the measure to its second week of losses.
“Doom and gloom is everywhere,” said Andy Brough, a London-based fund manager at Schroder Investment Management, which has about US$12.7 billion under management.
“It’s far harder for companies to come out saying they have actually noticed something improving,” he told Bloomberg Television.
The UK economy shrank more than economists forecast during the fourth quarter in the biggest contraction since 1980. GDP fell 1.5 percent from the previous quarter.
National benchmark indexes fell in 12 of 18 western European markets. Germany’s DAX dropped 0.8 percent. France’s CAC 40 retreated 0.7 percent as Axa SA declined. The UK’s FTSE 100 slipped 0.4 percent, led lower by Legal & General Group Plc.
Dividends in Europe could fall 10 percent last year and 3 percent this year, UBS AG equity strategists led by Nick Nelson wrote in note on Friday. US companies are reducing dividends at the fastest rate in half a century, squeezing investors who depend on the payouts more than ever to boost returns, data compiled by Bloomberg showed.
The worst financial crisis since the Great Depression is forcing companies to hoard cash after earnings before one-time costs dropped 38 percent last year, the most since 2001, data compiled by Bloomberg showed.
Analysts have cut estimates for company earnings worldwide by US$1 trillion since October, suggesting profits may tumble as much as 45 percent this year amid the global recession, Societe Generale SA’s Andrew Lapthorne wrote in a note on Friday.
Earnings at companies in the Stoxx 600 would fall 1.4 percent on average this year following a 17 percent slump last year, Bloomberg estimates showed.