European stocks dropped for a fourth week, the longest streak of losses since August, as concern resurfaced about the region’s debt crisis and economic reports in China and the U.S. missed estimates.
Societe Generale SA (GLE) and UniCredit SpA sank more than 8 percent as banks led losses on the Stoxx Europe 600 Index this past week. Banco Espirito Santo SA tumbled 13 percent as it announced a share sale. Nokia Oyj (NOK1V) slumped 21 percent after reporting an operating loss for its mobile-phone division and forecasting that earnings won’t recover this quarter.
The Stoxx 600 lost 2.2 percent to 253.4 as China’s economy slowed more than forecast and a U.S. report showed employers added fewer jobs in March than estimated. The gauge has still climbed 3.6 percent this year as the European Central Bank disbursed more than 1 trillion euros ($1.3 trillion) to the region’s lenders through its longer-term refinancing operation, or LTRO.
“Despite the intervention of the European authorities in the form of the LTRO, concerns have now spread to Spain,” said Richard Hunter, the head of equities at Hargreaves Lansdown Plc in London. “In the U.S., last week’s jobs numbers provided a hangover which has been difficult to shake off.”
Borrowing costs topped 6 percent this week in Spain, nearing the 7 percent level that prompted Greece, Ireland and Portugal to seek bailouts. The cost of insuring against a Spanish government default rose to a record today, according to CMA prices for credit-default swaps.
“Spain is not going to be rescued,” Prime Minister Mariano Rajoy said on April 12. “It’s not possible to rescue Spain, there’s no intention to.”
ECB Governing Council member Klaas Knot said that officials are far from reviving their program of purchasing government bonds.
“I think that we are very far from that situation, the instrument hasn’t been used for some time, but it’s still there, I hope we never have to use it again,” Knot said at an event in Amsterdam yesterday, when asked about the need for the ECB to buy government bonds. He also said that another three-year loan probably won’t be needed.
National benchmark indexes fell in all 18 western European markets, except Iceland and Greece. The U.K.’s FTSE 100 (UKX) slid 1.3 percent, Germany’s DAX dropped 2.8 percent and France’s CAC 40 declined 3.9 percent, the most this year. Italy’s FTSE MIB and Spain’s IBEX 35 posted the biggest declines, losing 5.6 percent and 5.4 percent, respectively. The IBEX 35 closed at the lowest level since March 2009.
‘Flames of Crisis’
Two weeks after Italian Prime Minister Mario Monti said the “flames of crisis” are unlikely to return, Spanish borrowing costs have surged to the highest since the ECB started its LTRO in December.
As equity markets reopened after Easter, stocks dropped around the world following a report showing American employers added 120,000 jobs in March, the fewest in five months and less than the median economist forecast of 205,000 in a Bloomberg survey. The amount had exceeded 200,000 for three straight months. U.S. and European equity markets were shut for the Good Friday holiday on April 6, when the Labor Department released its employment report.
Growth in China’s economy, the world’s second biggest, slowed more than forecast last quarter to the least in almost three years. Gross domestic product rose 8.1 percent from a year earlier following an 8.9 percent increase in the fourth quarter, the National Bureau of Statistics in Beijing said yesterday. That was less than the 8.4 percent growth predicted in a Bloomberg News survey.
Banks posted the largest declines among 19 industry groups on the Stoxx 600. Societe Generale, France’s second-biggest lender, slid 12 percent and UniCredit, the largest bank in Italy, sank 8.3 percent.
Banco Espirito Santo (BES) tumbled 13 percent as Portugal’s biggest publicly traded bank said it will sell as much as 1.01 billion euros of new stock.
Nokia retreated 21 percent, the largest drop since June. The biggest maker of mobile phones by volume said its devices and services unit probably had a first-quarter operating loss of about 3 percent of sales. The figure for the current period will be “similar to or below” the first quarter.
Randgold Resources Ltd. surged 8 percent after Mali’s military junta agreed to hand over power in the country that accounts for about two-thirds of the miner’s gold output.
Hays Plc jumped 6.5 percent after the U.K. recruitment company forecast full-year operating profit toward the top end of analysts’ estimates.
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