By Michael Patterson
Dec. 6 (Bloomberg) -- European stocks fell this past week, sending the Dow Jones Stoxx 600 Index to its worst December start, after reports showed manufacturing shrank around the world and U.S. companies cut jobs at the fastest pace in 34 years.
StatoilHydro ASA tumbled 18 percent and Xstrata Plc lost 38 percent as concern the global economic slump is deepening sent oil below $42 a barrel and copper to the lowest level since May 2005. ABB Ltd., the largest builder of electricity grids, dropped 12 percent after factory indexes in Europe, Russia, China and South Africa showed record contractions. Infineon Technologies AG, Europe’s second-largest chipmaker, plunged the most in the Stoxx 600 on a forecast that revenue will decline.
The Stoxx 600 retreated 8 percent this week to 189.84, bringing its decline this year to 48 percent. The index erased more than half of a 13 percent rally last week spurred by speculation government stimulus packages and interest-rate cuts would cushion economies from the financial crisis.
“Investors are being blown around in the wind,” Roger Nightingale, who helps oversee about $1.1 billion as a London- based strategist at Pointon York Ltd., said in an interview on Bloomberg Television. “The only thing that has been consistent is the economic data, and that is horrible. There isn’t really a single piece of good data out there.”
European Central Bank President Jean-Claude Trichet predicted this past week the euro region’s economy will shrink next year. The ECB delivered the biggest interest rate cut in its 10-year history and the Bank of England cut its benchmark rate to the lowest level since 1951. Sweden also lowered borrowing costs by the most since 1992 as central banks around the world struggle to stem job losses and revive credit markets.
National Markets
The Stoxx 600’s drop was the steepest for the first week of December since price data began. The index has posted an average December gain of 2.2 percent during its 21-year history, rising two-thirds of the time, according to monthly data compiled by Bloomberg.
National benchmark indexes fell in all 18 western European markets except Iceland. Germany’s DAX dropped 6.2 percent as Infineon tumbled 49 percent. The U.K.’s FTSE 100 decreased 5.6 percent, led by Xstrata. France’s CAC 40 lost 8.4 percent.
U.S. employers cut 533,000 jobs last month, exceeding all 73 forecasts in a Bloomberg News survey. The unemployment rate rose to 6.7 percent, the highest level since 1993. The figures increased expectations the Federal Reserve will reduce interest rates by at least 0.5 percentage point when policy makers meet this month.
StatoilHydro, Norway’s largest oil and gas company, declined to the lowest level since January 2005 and Xstrata, the Switzerland-based producer of copper and nickel, dropped to a four-year low.
ABB Slides
Crude oil was poised for the biggest weekly drop since the Persian Gulf War in 1991 on concern job losses in the U.S. will hurt demand for fuel. Copper touched the lowest since May 2005 in London trading.
ABB sank 12 percent as manufacturing in the 15 nations sharing the euro contracted by the most on record in November. A purchasing managers’ index dropped to 35.6 from 41.1 in October, remaining below the expansion threshold for a sixth month. That’s the lowest since Markit Economics began the poll in 1998.
The report signaled the euro-region economy’s first recession in 15 years is worsening. Trichet said gross domestic product will shrink around 0.5 percent next year as the financial turmoil takes its toll, the first time the ECB has ever predicted a contraction.
Infineon, New Star
Infineon forecast revenue will drop this fiscal year because of sliding orders from automakers and mobile-phone manufacturers. The company reported a seventh straight loss in its fourth quarter, partly on charges from the Qimonda AG memory-chip unit, which Infineon is struggling to sell.
New Star Asset Management Plc tumbled 87 percent after the London-based fund manager started by John Duffield in 2000 said lenders will take control of the company, which was hurt by a decline in assets under management. New Star plans to delist the stock and leave existing shareholders with a 25 percent.
Tesco Plc added 10 percent. The U.K.’s biggest supermarket company reported third-quarter sales growth that beat analysts’ estimates after introducing a cheaper product range to combat rivals.
Reports on U.S. retail sales, European industrial production and German investor sentiment next week may move markets as investors look for clues on the depth of the economic slowdown.
To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.
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