BNP Paribas (BNP) SA and Bayerische Motoren Werke AG led banks and carmakers lower, falling more than 7 percent, as investors shunned companies with profits most tied to economic growth. Logica Plc plunged 23 percent after the Anglo-Dutch computer- services provider reduced its sales-growth forecast.
The Stoxx Europe 600 Index slid 2.8 percent to 233.71 this past week. The benchmark gauge has slumped 15 percent in 2011 as the euro area’s sovereign-debt crisis spread to Italy and Spain and economic growth in the U.S. slowed. Optimism that the European Central Bank and governments across the region will stem the crisis has led to an 11 percent rebound from this year’s lowest level on Sept. 22.
“There is a risk that we will get a pretty serious recession in Europe,” said Bill Dinning, the Edinburgh-based strategy chief at Kames Capital Plc, which manages 47 billion pounds ($73 billion). “Economic growth is weak, the earnings outlook is weak and that’s making us cautious.” He spoke in a Bloomberg Television interview with Mark Barton on Dec. 15.
The Fed declined to take new action to lower borrowing costs in a statement on Dec. 13, saying the U.S. economy continues to expand even as global growth slows. The central bank repeated a warning at its two previous meetings that the “strains in global financial markets continue to pose significant downside risks to the economic outlook.”
Moody’s Investors Service said it will review the ratings of all European Union countries in the first quarter because an EU summit on Dec. 8 and Dec. 9 failed to deliver “decisive policy measures” to end the debt crisis.
Global investors are avoiding equities in the final month of 2011 and maintaining high levels of cash holdings, a Bank of America Corp. survey of money managers who oversee $608 billion showed Dec. 13. Investors cut holdings in European stocks (SXXP), with 35 percent saying they were “underweight” the region in December, compared with 30 percent last month.
“Investors end 2011 in a grim, resigned mood,” Michael Hartnett, chief global-equity strategist at BofA Merrill Lynch wrote in the report.
The Stoxx 600 rose 1 percent on Dec. 15 as U.S. Labor Department figures showed the number of applications for unemployment benefits dropped by 19,000 to 366,000 in the week ended Dec. 10, the fewest since May 2008. A Bloomberg survey of 47 economists had projected a reading of 390,000.
BNP Paribas, France’s biggest bank, retreated 15 percent. Societe Generale SA also declined 15 percent and HSBC Holdings Plc, the region’s largest lender, dropped 4.8 percent. A gauge of banks in the Stoxx 600 fell 6.1 percent, extending its slump for the year to 35 percent.
“The banks are in potentially quite a difficult situation,” said Matthew Moniot, the founder and chief investment officer of Elanus Capital Mangement in New York. He spoke in a Bloomberg Television interview in London. “The banks will not heel, no matter how much capital they are forced to hold, while we have this sovereign-debt overhang.”
BMW, the world’s largest maker of luxury cars, lost 7.1 percent and Daimler AG retreated 7 percent.
Logica fell 23 percent, the most since August, after reducing its full-year revenue growth forecast (LOG) to about 3 percent, compared with a Nov. 2 estimate for an increase of more than 3 percent. The company also said it will accelerate restructuring measures that will eliminate more than 1,300 jobs with charges of 80 million pounds this year.
Telefonica SA slid 7.7 percent after Spain’s largest telecommunications company cut its dividend (TEF) for the first time in a decade, highlighting the extent to which Europe’s sovereign debt crisis has curbed sales. The company cited market conditions, which it said have changed “significantly.”
Old Mutual Plc rallied 7.4 percent as the third-biggest U.K. insurer said it plans to sell its Nordic unit to Skandia Liv for 2.1 billion pounds to reduce debt and return capital to investors.
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