European shares fell for a third week, capping the biggest monthly drop since February last year, as concern grew countries worldwide may step up plans to withdraw stimulus measures and some earnings disappointed investors.
Xstrata PLC and ArcelorMittal led basic-resources shares to the biggest decline among 19 industry groups in the Dow Jones STOXX 600 Index last week. Fiat SpA sank 7.7 percent after the Italian automaker forecast lower western European industry sales. Banco Bilbao Vizcaya Argentaria SA retreated 8.6 percent as Spain’s second-biggest lender reported fourth-quarter earnings that missed analysts’ estimates.
The STOXX 600 slipped 1.2 percent to 246.96, bringing the monthly drop to 2.7 percent. Companies in the gauge are expected to report a 6.8 percent increase in last year’s earnings on average, while profits may climb 33 percent this year, analyst estimates compiled by Bloomberg showed.
“The expectations regarding profit development were very ambitious and although we had mainly positive surprises, some companies are also more cautious,” said Daniel Knuchel, who oversees about US$3 billion as chief investment officer at AAM Privatbank in Zurich. “We have entered a consolidation phase that may last for another two or three months before we see stabilization.”
The STOXX 600 has declined 5.1 percent from this year’s high on Jan. 19 as US President Barack Obama called for limits on risk-taking by banks and China moved to restrict lending to cool growth. The gauge is still 56 percent above its low last year.
The European Central Bank could take further steps in the first half of the year to withdraw liquidity from the banking system, council member Axel Weber said last week. Some Chinese banks were ordered to recall excess loans advanced this month to meet regulatory requirements, the Securities Times reported, citing an unidentified person familiar with the situation.
Stocks recouped some losses on Friday after a report showed the US economy expanded at a faster pace than estimated in the fourth quarter. The 5.7 percent increase in GDP, which exceeded the median forecast of economists surveyed by Bloomberg News, marked the best performance since the third quarter of 2003, US Department of Commerce figures showed.
National benchmark indexes fell in 12 of the 18 western European markets. The UK’s FTSE 100 retreated 2.2 percent as Man Group PLC tumbled. Germany’s DAX fell 1.5 percent and France’s CAC 40 slid 2.1 percent.
Basic-resources shares dropped the most among the industry groups in the STOXX 600, falling 4.6 percent, as copper posted its worst monthly performance since 2008. Xstrata, the fourth-largest copper producer, dropped 8.3 percent. ArcelorMittal, the biggest steelmaker, slid 6 percent. Rio Tinto Group, the third-largest mining company, lost 5.9 percent.
Fiat dropped 7.7 percent. The Italian carmaker that bought a 20 percent stake in Chrysler Group LLC said the western European auto market will shrink by at least 12 percent, prompting the company to postpone sales of some models.
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