European stocks fell for the first time in three weeks as the region’s economy shrank at the fastest pace in at least 13 years and Natixis SA and KBC Groep NV posted weaker-than-anticipated earnings.
Natixis and KBC led a retreat by banks, slumping more than 25 percent after posting quarterly losses. Land Securities Group PLC paced a decline among real-estate companies as it reported a record annual loss. HeidelbergCement AG tumbled 24 percent on speculation a debt-refinancing plan for the German cement maker is progressing too slowly.
The Dow Jones STOXX 600 Index lost 3.2 percent to 202.92 this week, the largest decline since the first week of March. Optimism that the global economy is recovering sent the gauge to the highest level since January last week and pushed valuations to a five-year high of 21.4 times the profits of its companies.
“The rally was on the back of some signs that the economic situation was stabilizing, reasonably cheap valuations and some short covering,” said Chirin Gill, a London-based fund manager at Daiwa SB Investments, which oversees US$60 billion. “We’ve seen some weakness this week on the back of some profit taking and worries that the economic recovery may not be as painless as the market is pricing in.”
National benchmark indexes fell in all of the 18 western European markets except Iceland. The UK’s FTSE 100 dropped 2.6 percent, paced by a slide in Rio Tinto Group and Lonmin PLC. France’s CAC 40 lost 4.3 percent and Germany’s DAX slid 3.6 percent.
Europe’s economy contracted 2.5 percent in the first quarter from the previous period as companies cut output and jobs to survive the worst global slump in more than six decades, according to the EU’s statistics office in Luxembourg.
The Bank of England this week said the UK economy faced a slow recovery.
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