European stocks dropped for a fourth straight week, the longest stretch of losses since March, as oil retreated and concern mounted that earnings reports will show the economic slump is far from over.
Royal Dutch Shell PLC, BP PLC and Total SA slid more than 3 percent as crude headed for the biggest weekly drop since January. Aviva PLC led insurers lower on speculation it will cut its dividend.
Renault SA, France’s second-largest automaker, sank 11 percent as chief executive officer Carlos Ghosn said the expiration of state-backed sales incentives will offset any improvement in demand next year.
The Dow Jones STOXX 600 Index declined 3.4 percent in the past week to 197.25, the lowest since April. The measure has slumped 8.2 percent since June 11 on speculation share prices have outpaced the outlook for economic growth after a three-month rally pushed valuations to 25.4 times earnings, the highest level since 2004.
“We are still in a consolidation phase after the gains we saw in March and April,” said Daniel Knuchel, who oversees about US$3 billion as chief investment officer at AAM Privatbank AG in Zurich. “The risk appetite has clearly retreated since then and sentiment is less positive. Markets are very news driven and investors are waiting for the earnings season.”
The IMF forecast the global economy will shrink 1.4 percent this year before expanding 2.5 percent next year. In April, the Washington-based lender had predicted a 1.3 percent contraction this year, followed by 1.9 percent growth next year.
National benchmark indexes fell in all 18 western European markets. The UK’s FTSE 100 slipped 2.6 percent and France’s CAC 40 retreated 4.4 percent. Germany’s DAX dropped 2.8 percent as Porsche SE declined.
Shell, Europe’s biggest oil company, decreased 3.8 percent in London. BP and Total, the second and third-largest, slid 3.7 percent and 4.6 percent respectively.
Aviva, the UK’s largest insurer, tumbled 19 percent, dragging a gauge of insurers 6.7 percent lower for the biggest decline among 19 industry groups in the STOXX 600.
“We estimate that Aviva cannot rule out reducing its dividend distribution by 20 percent at least this year,” CA Cheuvreux analyst Jean D’Herbecourt in Paris wrote in a report on Tuesday, reducing his recommendation on the stock to “underperform” from “outperform.”
Bloomberg’s analysis and research showed on Friday that the insurer may reduce its interim dividend next month to £0.0875 a share from £0.1309 last year.
Infineon Technologies AG surged 12 percent. Europe’s second-largest chipmaker agreed to sell its Wireline Communications business to an affiliate of Golden Gate Capital Corp for 250 million euros (US$346 million).