European Stocks Post Biggest Weekly Decline Since June

European stocks posted their biggest weekly decline since June as better-than-estimated U.S. economic reports spurred speculation that the Federal Reserve will begin cutting stimulus measures sooner than forecast.

ThyssenKrupp AG (TKA) slumped 9.3 percent after Germany’s largest steelmaker raised 882.3 million euros ($1.21 billion) through a share sale. Standard Chartered Plc lost 8.1 percent. Sage Group (SGE) Plc, the U.K.’s biggest software maker, rose 6.8 percent after reporting revenue growth that exceeded analysts’ estimates. AZ Electronic Materials SA surged 43 percent after Merck KGaA (MRK) agreed to buy it for about 1.6 billion pounds ($2.6 billion).

The Stoxx Europe 600 Index fell 2.7 percent to 316.5 this week. The regional benchmark gauge has still surged 13 percent in 2013 as central banks pledged to continue their support for economic growth. The Euro Stoxx 50 Index (SX5E), a measure for the euro area, lost 3.5 percent this week.

“Strong employment data means tapering comes sooner, but you also don’t want weak numbers,” Andreas Nigg, head of equity and commodity strategy at Vontobel Asset Management in Zurich, said in a phone interview. “This week has shown the latest economic reports to surprise on the positive side. While normally this could be a good omen for company earnings, we’re at a point in time where tapering fears trump that.”

National benchmark indexes retreated in all of the 18 western European markets this week, except in Iceland. Germany’s DAX (DAX) lost 2.5 percent, while France’s CAC 40 slid 3.9 percent. The U.K.’s FTSE 100 (UKX) slipped 1.5 percent for its fifth consecutive weekly retreat.

U.S. Economy

European markets pared weekly losses after data from the U.S. Labor Department on Dec. 6 showed payrolls increased by 203,000 in November, following a revised 200,000 advance in October. The median forecast of 89 economists surveyed by Bloomberg called for a 185,000 advance last month. The jobless rate dropped to a five-year low of 7 percent.

The Federal Open Market Committee meets on Dec. 17-18 to consider changes to its $85 billion of monthly bond buying. Officials said at their Oct. 29-30 meeting that they may slow their asset purchases if the economy improves as forecast.

Gains in manufacturing, technology and housing fueled “modest to moderate” economic growth from early October through mid-November, the Fed said in its Beige Book survey released on Dec. 4.

Manufacturing Gains

U.S. manufacturing rose in November, with the Institute for Supply Management’s factory index climbing to 57.3 in November from 56.4 a month earlier. That beat the median projection in a Bloomberg survey of 77 economists calling for a drop to 55.1. Separate data from the Commerce Department on Dec. 4 showed U.S. new-home sales jumped in October by the most in three decades.

European Central Bank President Mario Draghi said on Dec. 5 that increased commodity prices, weaker domestic demand and slow export growth all posed downside risks to the outlook for the euro area’s economy.

ECB officials kept the main refinancing rate unchanged at 0.25 percent as predicted by every economist in a Bloomberg News survey. In the U.K., the Bank of England left its key interest rate at a record low of 0.5 percent, in line with its own guidance on rates.

ThyssenKrupp lost 9.3 percent, after increasing capital by 10 percent of its market value on Dec. 3. That followed an agreement last week to sell a U.S. steel plant for $155 billion as it pulls back from its Americas division.

Standard Chartered

Standard Chartered, the U.K. lender that makes about three-quarters of its earnings in Asia, fell 8.1 percent after saying full-year operating profit at its consumer-banking unit will drop at least 10 percent, hurt by its Korean business.

Operating profit at the division “is now expected to be down by a double-digit rate,” while revenue is seen increasing “at a low single digit rate” in 2013, the London-based bank said in a statement on Dec. 4, without giving details. Consumer banking in Korea is expected to drop by about 15 percent.

Vienna Insurance Group AG declined 9.7 percent as an unidentified investor sold 2.29 million shares in Austria’s biggest insurer, according to terms obtained by Bloomberg. They were sold at 34.10 euros apiece, according to two people with knowledge of the deal.

Sage Group, which provides accounting and payroll software to more than 6 million mostly small and medium-sized businesses, advanced 6.8 percent. Sales, excluding items such as acquisitions and currency fluctuations, rose 5 percent in the fiscal second half, beating the 3 percent analysts predicted on average, Numis Securities said in a note on Dec. 4. Full-year underlying revenue rose 4 percent to 1.26 billion pounds.

AZ Electronic (AZEM) surged 43 percent, the most since its at least November 2010, after Merck on Dec. 5 said it had agreed to buy the company for about 1.6 billion pounds. Merck added 0.4 percent. Shareholders will get 403.5 pence for each share, Merck said. The price is 53 percent above the Dec. 4 closing level in London trading.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editor responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net

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