European shares last week fell by the most in almost three months after US President Barack Obama called for a limit on risk-taking by banks and concern mounted that China will take measures to stem economic growth.
Barclays PLC, Societe Generale SA and Bank of Ireland PLC led a gauge of bank stocks to a five-month low as Obama proposed that the size and trading activities of financial institutions be limited.
Rio Tinto PLC and Antofagasta PLC both sank more than 8 percent as copper slid for a second week.
The Dow Jones STOXX 600 Index erased all of its gains for the year last week, dropping 2.6 percent to 249.91, the sharpest weekly retreat since October.
Even so, the benchmark is still up 58 percent since March, driven by record-low interest rates, about US$12 trillion committed by governments worldwide and optimism about economic growth and corporate profits.
“Equity markets have climbed far higher than many expected and a bout of profit-taking is due,” said London-based Mike Lenhoff, who helps oversee about US$35.5 billion as chief strategist at Brewin Dolphin Securities Ltd.
Obama’s proposals “have really jolted the equity markets.
Their implementation may not see the light of day but they might continue to affect sentiment towards banks.”
Stocks also fluctuated as more than 60 companies in the Standard & Poor’s 500 Index reported fourth-quarter results last week in the US.
Some of the biggest banks including Citigroup Inc, Bank of America Corp, Morgan Stanley and Goldman Sachs Group Inc posted results.
National benchmark indexes fell in all 18 western European markets. The UK’s FTSE 100 retreated 2.8 percent, while Germany’s DAX fell 3.1 percent and France’s CAC 40 slid 3.4 percent.
Bank shares tumbled 6.2 percent to the lowest since August last year, amid concern Obama’s plans to rein in banks will hurt earnings.
The proposed reforms include a ban on financial institutions running proprietary trading operations or investing in hedge funds and private equity funds.
Barclays, the UK’s second-biggest bank, and France’s Societe Generale both sank 13 percent. Credit Suisse Group AG, Switzerland’s biggest bank by market value, declined 9.5 percent.
Basic-resource stocks this week lost 5.5 percent amid fears China, the world’s largest user of industrial metals, may raise interest rates. Reports showed Chinese inflation accelerated to a more-than-forecast 1.9 percent last month and GDP climbed 10.7 percent, the fastest pace since 2007.
Rio Tinto, the world’s third-largest mining company, sank 8.1 percent, as did Antofagasta, the owner of copper mines in Chile. Kazakhmys PLC, Kazakhstan’s biggest copper producer, retreated 8.2 percent.
Drug stocks were among just two industry groups to rise last week, along with food and beverage shares.
The gauge gained 0.9 percent as investors speculated Obama’s plan for healthcare overhaul in the US will be derailed after the Democrats lost a key Senate seat.
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