European stocks posted their third weekly drop amid concern that the Federal Reserve may reduce bond buying as soon as September and as the European Central Bank refrained from announcing new stimulus measures.
Man Group Plc, the biggest publicly traded hedge-fund manager, plunged 18 percent after reporting a decline in the net asset value of its flagship fund. Aberdeen Asset Management Plc tumbled 11 percent. Voestalpine AG climbed 10 percent after raising its dividend. Elan Corp. gained 5.5 percent after Royalty Pharma increased its offer for the Irish drugmaker.
The Stoxx Europe 600 Index fell 1.8 percent to 295.4, for the longest streak of weekly losses in two months. The gauge still rebounded yesterday, trimming a weekly retreat of as much as 3.4 percent, as investors bet that U.S. data showing an increase in both hiring and the unemployment rate left little scope for an immediate reduction in stimulus measures.
“The Fed knows the economy is on a sound footing and that it needs to take some of the financial stimulus away,” Richard Woolnough, who helps oversee $369 billion at M&G Investments in London, said in e-mailed comments. He manages the M&G Optimal Income Fund, which invests in bonds and equities. “It is basically saying thanks for your custom, please finish up your drinks and leave the bar.”
Separate statements from Fed officials earlier in the week had spurred concern that the central bank may start trimming its $85 billion monthly bond purchases in September.
Fed Bank of San Francisco President John Williams said in Stockholm that policy makers may end quantitative easing by the end of the year. Fed Bank of Dallas President Richard Fisher, who opposed the current round of bond-buying in September as well as the expansion of the program to Treasuries in December, reiterated his backing for reducing stimulus.
Fed Bank of Kansas City President Esther George supported slowing purchases “as an appropriate next step for monetary policy,” according to the text of a speech.
Also this week, economists at Goldman Sachs Group Inc. and Deutsche Bank AG predicted that the Fed could start winding down its bond-buying program.
Still, Fed Bank of Atlanta President Dennis Lockhart on June 3 said the central bank is committed to the program and that the economy lacks the strength to justify a reduction.
In the euro area, the ECB kept its benchmark interest rate unchanged and refrained from announcing any new stimulus measures. President Mario Draghi said on June 6 policy makers discussed additional steps and stand ready to act if needed.
“People are more concerned about their bond allocations and about a bond bubble,” said Colin McLean, who helps oversee $620 million at SVM Asset Management Ltd. in Edinburgh. “Unless you have a meltdown, that move into equities will go on. You can worry about how Europe evolves, but the solution is still buying equities.”
National benchmark indexes declined in all of western Europe’s 18 markets except Iceland. The U.K.’s FTSE 100 Index lost 2.6 percent, Germany’s DAX slid 1.1 percent and France’s CAC 40 retreated 1.9 percent.
Man Group plunged 18 percent after saying that the net-asset value of its A Man AHL Diversified fund decreased 6.1 percent last week. UBS AG lowered its recommendation on the shares to neutral from buy, saying that the fund’s recent performance will reduce Man’s earnings. A gauge of financial companies was the worst performer in the Stoxx 600 this week.
Aberdeen Asset Management tumbled 11 percent. Bank of America Corp.’s Merrill Lynch unit cut its rating on Scotland’s largest money manager to underperform, similar to a sell recommendation, from neutral, saying the stock’s price is unjustified given slowing earnings growth.
Hochtief AG, Germany’s largest construction company, dropped 6.9 percent. Berenberg Bank on June 7 cut its recommendation on the shares to hold from buy, citing a worsening outlook for Australian construction and mining.
Roche Holding AG, the world’s largest maker of cancer drugs, slid 3.2 percent after a study showed that its Avastin drug failed to extend the lives of patients with a type of brain cancer. The study found no advantage in using the drug as a first-line therapy against glioblastoma.
Voestalpine AG rallied 10 percent. Austria’s biggest Steelmaker on June 5 proposed to raise its dividend by 10 euro cents to 90 euro cents a share, exceeding analysts’ forecasts.
Elan advanced 5.5 percent. Royalty Pharma raised its takeover offer for the drugmaker to $13 per American depositary receipt plus a contingent value right of as much as $2.50. The offer was previously $12.50 per ADR.
Johnson Matthey gained 5.6 percent. The U.K. platinum refiner and producer of auto-catalysts posted underlying pretax profit that slipped to 389.2 million pounds in the full-year ending in March, still beating the 379.1 million-pound average estimate in a Bloomberg survey.