By Daniela Silberstein
Dec. 20 (Bloomberg) -- European stocks fell this past week, led by financial companies and commodity producers on concern corporate earnings may deteriorate further as the global economic slowdown deepens.
BNP Paribas SA tumbled 31 percent after saying losses at its investment bank since October more than wiped out the division’s profit this year. Royal Bank of Scotland Group Plc lost 23 percent after disclosing investments with Bernard Madoff, the investment adviser who was arrested in a potential $50 billion fraud. BG Group Plc and Xstrata Plc both sank more than 3 percent as crude oil plunged below $36 a barrel and metal prices fell.
The Dow Jones Stoxx 600 Index retreated 0.9 percent this week to 196.43, bringing its decline this year to 46 percent as credit losses and writedowns at the world’s largest banks surpassed $1 trillion and the U.S., Europe and Japan entered the first simultaneous recessions since World War II.
“The economic slowdown is reflected in the price of oil,” said Chicuong Dang, an analyst at KBL Richelieu Gestion in Paris, which has about $5.6 billion under management. “It shows that the market context is very difficult. We have to expect further downgrades of ratings and profit warnings. There’s a lot of volatility to come.”
The Stoxx 600 dropped every day this week except Dec. 16. The U.S. Federal Reserve this week cut its benchmark interest rate to as low as zero for the first time and pledged to use “all available tools” to spur economic growth. President-elect Barack Obama may ask Congress to approve a stimulus plan of around $850 billion.
National Benchmarks
The European Central Bank also cut the rate it pays institutions to deposit money with it overnight in an effort to jolt banks into lending more to each other.
National benchmark indexes rose in 10 out of 18 western European markets. Germany’s DAX gained 0.7 percent as Daimler AG advanced 8.3 percent. The U.K.’s FTSE 100 increased 0.2 percent. France’s CAC 40 added 0.4 percent.
The Dow Jones Europe Stoxx Banks Index fell 6.5 percent in the week, the sharpest retreat among 19 industry groups.
BNP, France’s largest bank, plunged 31 percent. The corporate and investment division had a 710 million-euro ($981 million) pretax loss in the first 11 months of 2008, and may cut about 800 jobs, or 5 percent of the unit’s staff.
Separately, a Belgian court froze the lender’s plans to buy Fortis assets and the bank said it has as much as 350 million euros at risk from investments with Madoff.
Fortis
Fortis, the insurer that was once Belgium’s largest financial services company, rallied 22 percent in Brussels.
HSBC Holdings Plc slipped 16 percent. CLSA Asia-Pacific Markets said Europe’s largest bank may seek to raise about $14 billion as increasing bad-loan provisions erode profits. HSBC also has $1 billion at risk after providing financing to funds that invested with Madoff.
Royal Bank of Scotland declined 23 percent as the U.K.’s second-largest bank said it may lose as much as 400 million pounds ($601 million) on Madoff investments.
HSBC and RBS were also among 12 U.S. and European financial firms whose ratings or outlooks were cut by Standard & Poor’s, which cited increased risks for the whole banking industry.
Basic-resources companies and oil and gas companies were the second and third-worst performers in the Stoxx 600 this week, losing 3.9 percent and 3.6 percent respectively.
Crude oil fell 24 percent this week as a deepening global recession saps demand, countering efforts by OPEC to boost prices.
BG Group
BG Group, the third-biggest U.K. oil and gas producer, lost 3.4 percent. Galp Energia SGPS SA, Portugal’s largest oil and gas company, tumbled 5.5 percent.
Copper, lead, nickel and tin fell in London. Copper may decline next week as demand from the housing industry slumps in the U.S., the second-biggest buyer of the metal used in wires and pipes, a Bloomberg News survey showed.
Xstrata, Europe’s largest zinc producer, slid 8.6 percent. Antofagasta Plc, the copper producer controlled by Chile’s Luksic family, retreated 7.6 percent. Anglo American Plc, the world’s fourth-largest diversified mining company, lost 3.2 percent.
UBS AG cut its recommendation for the three companies to “neutral” from “buy.”
Carrefour SA sank 4.1 percent. The retailer reduced its full-year sales and profit projections for a second time this year. Kesa Electricals Plc, the owner of Darty electronics stores in France and Comet outlets in the U.K., slipped 6.4 percent after reporting a first-half loss as sales stagnated.
Inchcape
Inchcape Plc, a global operator of car dealerships, plunged 35 percent after predicting that earnings next year will be “significantly” lower than previously forecast as economies slow and customers have difficulty obtaining loans.
Celesio AG, Europe’s biggest drug wholesaler, dropped 13 percent after an adviser to the European Union’s highest court cast doubt on the company’s plans to build a pharmacy chain in Germany.
Daimler, the world’s largest truckmaker, added 8.3 percent. U.S. President George W. Bush announced $13.4 billion in initial government loans for General Motors Corp. and Chrysler LLC.
Siemens AG rose 9.8 percent. Europe’s largest engineering company made more than 20 percent of its sales in the U.S. last year. Unilever Plc increased 8.6 percent in London. The world’s second-largest consumer products company relied on the Americas for about a third of its sales last year.
To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.
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