European stocks fell in the year’s last full week of trading, snapping a five-week rally, as the deadline neared for US lawmakers to agree on a deal to half US$600 billion of automatic tax increases and spending cuts.
The STOXX 600 Europe Index dropped 0.8 percent to 278.78 this week, but has rallied 14 percent for the year, the biggest increase in three years, as the European Central Bank and the US Federal Reserve moved to bolster the economy.
Friday was the final trading day of the year for Germany, Switzerland, Italy, Denmark, Finland, Norway, Sweden and Austria. Markets in the UK, France and the Netherlands, among others, are open tomorrow.
“While investors are still pinning their hopes on a last-minute deal to avert the US fiscal cliff, congressional leaders are already playing the blame game, boding ill for an agreement before Dec. 31,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said on Friday. “Markets are only beginning to come to terms with the increasing likelihood that US congressional leaders will fail to strike a deal in time.”
National benchmark indexes retreated in 16 of western Europe’s 18 markets this week. France’s CAC 40 dropped 1.1 percent and the UK’s FTSE 100 Index declined 0.3 percent. Germany’s DAX also slipped 0.3 percent, paring this year’s rally to 29 percent.
The year’s gains in the STOXX 600 have been led by automakers and insurance companies, with gauges of stocks in both industries surging more than 30 percent.
Sky Deutschland AG, the German pay-TV provider half-owned by Rupert Murdoch’s News Corp, has been the best-performing company in the index this year, soaring 194 percent.
Japanese Prime Minister Sanae Takaichi has talked up the benefits of a weaker yen in a campaign speech, adopting a tone at odds with her finance ministry, which has refused to rule out any options to counter excessive foreign exchange volatility. Takaichi later softened her stance, saying she did not have a preference for the yen’s direction. “People say the weak yen is bad right now, but for export industries, it’s a major opportunity,” Takaichi said on Saturday at a rally for Liberal Democratic Party candidate Daishiro Yamagiwa in Kanagawa Prefecture ahead of a snap election on Sunday. “Whether it’s selling food or
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