Europe Shares Pare Best Week in Months on Renewed Economy Worry

European Stocks Register Weekly Gain Despite Friday Slide
  • Banks decline the most among industry groups in the Stoxx 600
  • Most markets in the region fall, while FTSE 100 little changed

Signs that Europe’s recovery is struggling and investors rushing to sell company stakes put a halt to this week’s rally in European shares.

Polymetal International Plc sank 7.4 percent after two investors said they’ll sell 13 million shares of the miner. Moncler SpA, the Italian maker of luxury skiwear, dropped 2.2 percent and Scout24 AG, a German operator of online classifieds businesses, fell 4.1 percent after shareholders also sold a stake. CaixaBank SA lost 3.8 percent, helping send lenders to the biggest decline among sectors, after it sold shares for 1.3 billion euros ($1.5 billion) to fund its takeover of Portugal’s Banco BPI SA.

“It may well signal a more cautious stance,” said Ralf Zimmermann, a strategist at Bankhaus Lampe in Dusseldorf, Germany. “Drivers for a sustainable increase in stock prices would be a reasonable acceleration in the business and earnings cycle, but we don’t see that happening in the short term, so we’re stuck in a broader sideways-trading range.”

European equities trimmed their biggest weekly advances since July, with almost all industry groups falling, as skepticism about the recovery resurfaced. A monthly composite Purchasing Managers Index slumped to a 20-month low, and economic data are back to missing forecasts. The Stoxx Europe 600 Index lost 0.7 percent on Friday, and a Bank of America Corp. report showed fund managers have withdrawn money from the region’s equities for a 33rd straight week, extending a record streak of outflows.

While the Stoxx 600 rallied 3 percent in the past four days as the Federal Reserve kept borrowing costs unchanged and the Bank of Japan said it would adjust its asset buying to control bond yields, European equities have been stuck in a tight trading range. Since the end of May, the benchmark gauge’s 100-day moving average has been hovering around the same level.

The European index is down 5.6 percent this year, while peers in the U.S. and Asia have climbed more than 6 percent. The region’s lenders have led the declines amid growing worries about profitability in a low-rate environment, while legal costs mount and Italy may face a banking crisis.

On Friday, European lenders fell from an almost two-week high, with Spanish firms leading the losses. Banco Santander SA dropped 3.3 percent, its biggest slide since Aug. 2, while Banco de Sabadell SA lost 4.2 percent. Deutsche Bank AG, down 2 percent and trading near a record low, has been in focus after the U.S. sought $14 billion to settle claims related to the sale of mortgage-backed securities, and German politicians are increasingly concerned about the company’s finances.

A snapshot of the region’s markets shows:

  • Banks pushed Spain’s IBEX 35 Index 1.3 percent lower, while benchmark gauges of Italy and Portugal declined more than 0.7 percent.
  • The OMX Copenhagen 20 CAP Index lost 1.5 percent, with drugmaker H. Lundbeck A/S sinking 15 percent, the most since 2009. The company said a treatment for Alzheimer’s disease failed the first of three pivotal studies. 
  • Germany’s DAX Index slipped 0.4 percent after its biggest jump since Aug. 9, with Deutsche Bank falling the most.
  • The U.K.’s FTSE 100 Index was little changed. While Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc fell more than 2 percent, homebuilders climbed after Liberum upgraded the sector’s price estimates. Sports Direct International Plc rallied 5.5 percent after saying founder Mike Ashley will take over as chief executive officer, replacing Dave Forsey.

Among other stocks moving, Nestle SA declined 1.7 percent as analysts said a company presentation on Thursday suggested organic sales growth may be lower than expected. Swiss food maker Aryzta AG jumped 9.9 percent after saying Gary McGann, currently chairman of Paddy Power Betfair Plc, will join its board as chairman. Moleskin SpA jumped a record 16 percent after Belgium’s D’Ieteren SA said it will make an offer to buy the Italian lifestyle company.

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