European stocks fell for the first week in more than a month as investors speculated share prices have outpaced the outlook for economic growth and companies from Aegon NV to Nestle SA posted lower earnings.
Aegon, the Dutch owner of US insurer Transamerica Corp, slumped 12 percent, while Nestle, the world’s biggest food company, sank 4.4 percent. Volkswagen AG plummeted 24 percent after saying it will pay about 3.3 billion euros (US$4.7 billion) for a stake in Porsche SE’s automotive unit.
Europe’s Dow Jones STOXX 600 Index lost 0.8 percent to 228.77 in the past week, snapping four weeks of gains. A 45 percent rebound since March 9 has left the regional measure valued at 39.9 times the profits of its companies, the most expensive since September 2003, weekly data compiled by Bloomberg show.
“In the short term you have to be cautious, equities are no longer very cheap,” said Manfred Hofer, head of equity analysis at LGT Capital Management in Pfaeffikon, Switzerland, which oversees about US$73 billion. “Companies have been able to post profits because of cost cutting. We now need to see economic data confirm an upturn, then it’s possible that profits and revenues will increase.”
The euro region’s economy contracted 0.1 percent in the second quarter as Germany and France unexpectedly returned to growth, suggesting Europe’s worst recession since World War II is coming to an end. Economists had estimated gross domestic product declined 0.5 percent in the three months through June, the median of 32 forecasts in a Bloomberg survey showed.
Bank of England Governor Mervyn King said that while recent economic reports are “encouraging,” growth won’t resume on an annual basis until 2010 while banks restrict access to credit.
National benchmark indexes declined in 10 of the 18 western European markets. The UK’s FTSE 100 lost 0.4 percent, and France’s CAC 40 decreased 0.7 percent. Germany’s DAX dropped 2.8 percent as Daimler AG slid.
Aegon tumbled 12 percent. The Dutch insurer posted a fourth straight quarterly loss on writedowns and the sale of a unit and said it will sell 1 billion euros of shares to help repay state aid. The second-quarter net loss was 161 million euros, wider than analysts’ estimates, and compared with a profit of 276 million euros a year earlier.
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