European stocks wrapped up a week of deepest drop since June as better-than-estimated U.S. economic reports caused speculation that the Federal Reserve will begin cutting stimulus measures sooner than forecast.
The Stoxx Europe 600 Index fell 2.7% to 316.5 last week. The regional benchmark index has still surged 13% in 2013 as central banks pledged to continue their support for economic growth. The Euro Stoxx 50 Index, a measure for the euro area, lost 3.5% this week. Germany’s DAX plunged 2.5%, while France’s CAC 40 slid 3.9%. The U.K.’s FTSE 100 (UKX) slipped 1.5% for its fifth consecutive weekly retreat.
“Strong employment data means tapering comes sooner, but you also don’t want weak numbers,” Andreas Nigg, head of equity and commodity strategy at Vontobel Asset Management in Zurich, said in a phone interview for Bloomberg. “This week has shown the latest economic reports to surprise on the positive side. While normally this could be a good omen for company earnings, we’re at a point in time where tapering fears trump that.”
The Federal Open Market Committee meets on December 17-18 to consider changes to its $85 billion of monthly bond buying. Officials emphasized that on October 29-30 meeting that they may slow their asset purchases if the economy improves as forecast.
Rise in manufacturing, technology and housing fueled substantial economic growth from early October through mid-November, the Fed said in its Beige Book survey released on December 4.
European Central Bank President Mario Draghi said on December 5 that increased commodity prices, weaker domestic demand and slow export growth all posed downside risks to the outlook for the euro area’s economy. ECB officials kept the main refinancing rate unchanged at 0.25%.
In European corporate news, AZ Electronic gained 43%, the most since its at least November 2010, after Merck on December 5 said it had agreed to buy the company for about 1.6 billion pounds. Merck added 0.4%. Shareholders will get 403.5 pence for each share, Merck said. The price is 53 percent above the December 4 closing level in London trading.