A slump in Spanish and Italian lenders sent European stocks down for a second week, the longest streak since October last year.
The STOXX Europe 600 Index lost 1.3 percent to 337.93 at the close of trading in London on Friday, amid concern that the European Central Bank’s (ECB) bond-buying plans would not be enough to shore up the economy, while a US employment report showed a drop in hourly earnings. Friday’s decline brought the measure down 1 percent for the week.
The ECB is studying models for buying as much as 500 billion euros (US$591 billion) of investment-grade assets, a person familiar with the matter said. While the STOXX 600 briefly erased gains after better-than-forecast US jobs data, it then fell as much as 1.8 percent as earnings for all employees unexpectedly declined from a month earlier.
“This has the potential to have a negative impact as it is only 500 billion euros,” said Soeren Steinert, an associate director for equities trading at Quoniam Asset Management GmbH in Frankfurt, referring to the potential ECB bond-buying models. “Other higher numbers were rumored — even trillions — and [ECB President Mario] Draghi talked about unlimited firepower. So these dramatic words built up expectations. I don’t think this is big enough.”
The STOXX 600 reversed a two-day gain. It rallied the most in three weeks on Thursday, erasing losses for this year, amid speculation that weak inflation data this week bolster the case for the ECB to start sovereign-bond purchases at its Jan. 22 meeting. The benchmark gauge has posted gains in January in three of the past four years, data compiled by Bloomberg show.
The volume of shares on the benchmark index traded was 23 percent higher than the 30-day average, data compiled by Bloomberg show.
Banks declined the most among 19 industry groups in the STOXX 600, falling 3.2 percent to their lowest level since September 2013.
Banco Santander SA plunged 14 percent, the most since 1999, after its board approved plans to cut its dividend and sell shares for as much as 7.5 billion euros. Shares of Spain’s largest bank rose 3.3 percent on Thursday before the regulator suspended them.
Banca Monte dei Paschi di Siena SpA tumbled 8.6 percent after the ECB told the Italian lender to increase its minimum capital ratio as part of its fundraising plan.
Spain’s IBEX 35 Index lost 3.9 percent, the most since September 2012 and the biggest drop among 18 Western European markets. Italy’s FTSE MIB Index slid 3.3 percent for the second-worst performance and France’s CAC 40 Index lost 1.9 percent. A terror crisis in Paris deepened after a massacre at satirical weekly Charlie Hebdo left 12 people dead earlier this week.
In the UK, homebuilders Taylor Wimpey PLC, Barratt Developments PLC and Persimmon PLC fell more than 5 percent as a report showed house-price growth in England and Wales slowed.
Among other stocks moving on corporate news on Friday, Tesco PLC lost 2.5 percent. The UK grocer, which surged the most in more than 26 years on Thursday after announcing measures from lower prices to store closures, was cut to below investment grade at Moody’s Investors Service.
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