European stocks fell for a seventh week on concern efforts by US policymakers and regulators to stem credit-market losses won't be enough to keep the world's largest economy from sliding into a recession.
Societe Generale SA dropped the most in more than five years after saying bets on stock-index futures by a rogue trader caused a 4.9 billion euro (US$7.1 billion) trading loss, the biggest in banking history. E.ON AG and RWE AG, Germany's largest utilities, led the Dow Jones Europe STOXX Utilities Index to its worst week since September 2001 as power prices declined and EU regulators outlined tighter restrictions on emissions.
The STOXX 600 Index retreated 1.6 percent to 322.23 in the past week, the longest falling streak since October 1998. The measure slumped the most since the Sept. 11, 2001, terrorist attacks on Monday. It clawed back some losses after the Federal Reserve's emergency interest-rate cut the following day and as talks to bail out bond insurers started.
"We're on the brink of a recession in the US and the danger is that it will spill over to Europe," said Ulf Moritzen, who helps manage the equivalent of US$8 billion at Nordinvest in Hamburg. "If the world's biggest economy goes down, all are affected."
The Fed lowered its benchmark lending rate by 0.75 percentage point to 3.5 percent on Tuesday. New York State regulators met with banks Wednesday to ask them to extend capital to bond insurers and stave off credit-rating reductions. A rescue would need to be arranged before Moody's Investors Service and Standard & Poor's complete their reviews in the next few weeks.
"The Fed is starting to realize just how serious the situation is and, at last now, is in front of the curve," said Jonathan Monk, a fund manager at Aerion Fund Management in London, which oversees about US$23 billion.
National benchmarks fell in 12 of the 18 western European markets. Germany's DAX Index slumped 6.8 percent in the week and France's CAC 40 decreased 4.2 percent. The UK's FTSE 100 lost 0.6 percent. The STOXX 50 dropped 3.2 percent. The Euro STOXX 50, a measure for the euro region, retreated 5.5 percent.
Societe Generale sank 13 percent, the biggest weekly decline since the week ended Oct. 4, 2002. France's second-largest bank said Jerome Kerviel, 31, was the trader responsible for the trading loss. Kerviel secretly set up unauthorized positions, going beyond permitted limits on futures linked to European stock indexes, Societe Generale said.
E.ON, Germany's largest utility, lost 13 percent, the steepest drop since the week ended Oct. 2, 1998. RWE, the second-biggest, decreased 12 percent.
The STOXX Utilities Index lost 7.1 percent, the worst drop since the week of the Sept. 11 terrorist attacks.
Electricity for next year in Germany, Europe's biggest power market, had fallen 6.7 percent as of Wednesday from a Jan. 8 record of 63.25 euros a megawatt-hour, following declines in fuel and emission permits. Dutch prices also slid 6.7 percent in the period.
The EU will probably make its 2020 greenhouse-gas reduction target stricter, requiring emission cuts of 30 percent from 1990 levels, because nations will reach a new climate-protection agreement, an official said.
Gaz de France SA, owner of Europe's largest natural-gas network, retreated 8.3 percent.
Sanofi-Aventis SA, France's largest manufacturer of pharmaceuticals, and GlaxoSmithKline Plc, the world's second-biggest, declined after regulatory setbacks.
Sanofi fell 9.3 percent. The company's experimental stroke drug Idraparinux caused more bleeding in some patients than a standard treatment in a study stopped ahead of schedule in 2005, researchers writing in the Lancet said.
Glaxo dropped 7.8 percent. The company's Avandia diabetes pill shouldn't be prescribed for patients with some heart conditions, European regulators said on Thursday.
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