European Stocks Post Back-to-Back Weekly Decline

European stocks posted a second weekly loss, their first back-to-back decline in two months, as investor demand for equities waned before Christmas holidays and a Federal Reserve meeting next week on stimulus measures.

PSA Peugeot Citroen (UG) completed the biggest weekly slump since 2008 after disclosing a $1.5 billion charge and as General Motors Co. sold its entire stake in the French carmaker. RSA Insurance Group Plc slid 9.1 percent after Chief Executive Officer Simon Lee resigned amid an accounting probe that raised questions about internal controls at the insurer. John Wood Group Plc tumbled 9.6 percent after saying 2014 earnings at its engineering group may decrease by about 15 percent.

The Stoxx Europe 600 Index fell 2.1 percent to 309.75 this week, with mean daily trading plunging 14 percent from this year’s average volume. The gauge has dropped 4.7 percent in December, trimming 2013 gains to 11 percent, as better-than-estimated U.S. economic data led some investors to speculate the Fed will decide to slow bond purchases as early as next week. The Euro Stoxx 50 Index of euro-area stocks lost 2 percent this week.

“These markets are running on fumes,” Michael Ingram, a market strategist at BGC Partners LP in London, said by telephone. “There’s no real volume and no real conviction. Most money managers have basically shut up shop for the year. They’ve made decent money this year. People don’t want to mess up their performance by trying something in December.”

National benchmark indexes retreated in all 18 western European markets except for Iceland this week. Germany’s DAX fell 1.8 percent. France’s CAC 40 dropped 1.7 percent. The U.K.’s FTSE 100 (UKX) lost 1.7 percent, for its sixth consecutive weekly decline.

Taper Timing

A majority of investors still believe the Fed will start to reduce $85 billion a month of bond purchases only next year. Even so, 34 percent of economists surveyed by Bloomberg on Dec. 6 predicted the U.S. central bank will decide to taper stimulus measures at its Dec. 17-18 meeting. That proportion is higher than the 17 percent of respondents who said so in a Nov. 8 poll.

The U.S. House of Representatives on Dec. 12 passed the first bipartisan budget in four years and the Senate will consider it next week. The plan will reduce the scope of automatic spending cuts by $63 billion and sparing the federal government another shutdown like the one it experienced in October.

A Commerce Department report in Washington showed retail sales in the world’s largest economy gained in November by the most since June, topping forecasts. Separate data showed initial jobless claims increased in the week ended Dec. 7.

Peugeot Tumbles

Peugeot plummeted 22 percent. Profit this year will take a hit because of foreign-exchange swings, while savings from an alliance with General Motors Co. will be about 40 percent less than planned. Separately, GM said it was selling its entire 7 percent holding in Peugeot.

RSA Insurance dropped 9.1 percent to an eight-year low as an accounting probe at its Irish unit prompted the insurer to bolster reserves by 130 million pounds ($212 million) and forecast a further reduction in 2013 earnings. The company said it expects its return on equity to fall to mid-single digit. RSA had said on Nov. 5 the ROE would miss its 10 percent target following the storms that hit Europe in October.

Wood Group (WG/) plunged 9.6 percent. The U.K. oil-services provider said delays in offshore projects and weakness in its Canadian market may lead to lower 2014 earnings before interest, taxes and amortization at its engineering unit.

FTSE Review

Vedanta Resources Plc declined 8.2 percent after the FTSE Group announced the oil and metal producer will leave the U.K.’s benchmark FTSE 100 Index at the close of trading on Dec. 20. A gauge of commodity companies posted the biggest loss in the Stoxx 600, falling 4 percent.

Inmarsat Plc gained 7.2 percent. The largest provider of maritime-satellite services said the launch of its Global Xpress satellite was successful. The satellite will provide high-speed mobile data.

European Aeronautic, Defence & Space Co. rose 7.7 percent, its biggest weekly increase in nine months. The Airbus SAS parent said it will target a dividend-payment ratio of 30 percent to 40 percent. The latest U.S. budget proposal includes a defense spending cap of about $520 billion for the 2014 fiscal year, compared with the current limit of $498 billion.

Ziggo NV (ZIGGO) advanced 5.4 percent. The Dutch broadband provider said it is in discussions with Liberty Global for a potential offer. The cable company controlled by billionaire John Mallone already owns 30 percent of Ziggo.

To contact the reporter on this story: Inyoung Hwang in London at ihwang7@bloomberg.net

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

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