European stocks declined for a sixth week to their lowest in three years as oil surged to a record, fueling inflation, while companies from banks to retailers said a slowdown in economic growth is hurting earnings.
Michelin & Cie, the world’s second-largest tiremaker, and Volkswagen AG, Europe’s biggest carmaker, slid. Carrefour SA, the region’s largest retailer, sank to its lowest in more than five years after saying sales growth slowed. Bank of Ireland PLC fell after saying the economy is “adversely impacting” profit. Wienerberger AG led construction stocks lower on earnings.
The Dow Jones STOXX 600 Index sank 3.3 percent this week to 270.36, for the longest weekly declining streak since January. The index is down 26 percent this year as a rout led by banks trimmed more than US$11 trillion from global equities.
“The market is very nervous,” said Edouard Carmignac, chief investment officer at Carmignac Gestion, which oversees US$24 billion in Paris. “We can’t see very clearly. The increase in raw materials prices is decreasing buying power and creating inflationary pressure.”
Record oil prices, accelerating inflation and more than US$400 billion in credit-related losses threaten to push the US into recession and stifle profit growth. Earnings for STOXX 600 companies are expected to drop 2.3 percent this year, according to data compiled by Bloomberg. That compares with an estimate for a 0.7 percent decrease a month ago.
“Investors are focusing on the return of worries about the financial industry,” said Alexandre Iatrides, a fund manager at Richelieu Finance in Paris, which oversees US$6.2 billion. “There’s still the specter of a crisis. That adds to concern about the economic slowdown and the rise in oil prices.”
National benchmark indexes retreated in all of the 18 western European markets. Germany’s DAX Index fell 1.9 percent this week. France’s CAC 40 lost 3.9 percent. The UK’s FTSE 100 slipped 2.8 percent, bringing its loss from last year’s high to 22 percent. The STOXX 50 retreated 2.9 percent, and the Euro STOXX 50, a measure for the euro region, slid 2.4 percent.
The Bank of England kept its key interest rate unchanged at 5 percent on July 10, in line with economists’ predictions, as policy makers weighed the threat of Britain’s first recession in a generation against the risk of accelerating inflation.
“We expect the markets to stay lower,” Rainer Gerdau, head of equity strategy at Saxo Bank A/S, said in a Bloomberg Television interview. “It is too early for a turn-around, the recession is yet to come.”
Crude oil rose to a record on concerns that Israel may be preparing to attack Iran, while a strike in Brazil and renewed militant activity in Nigeria threaten to cut supplies. The contract for August delivery reached an all-time high of US$147.27 a barrel on the New York Mercantile Exchange.
Michelin retreated 8.2 percent. Volkswagen lost 4 percent.
Air Berlin PLC sank 18 percent. Europe’s third-biggest low-cost airline pulled out of talks to buy German charter carrier Condor from Thomas Cook Group PLC after fuel costs surged.
A Chinese freighter that allegedly snapped an undersea cable linking Taiwan proper to Penghu County is suspected of being owned by a Chinese state-run company and had docked at the ports of Kaohsiung and Keelung for three months using different names. On Tuesday last week, the Togo-flagged freighter Hong Tai 58 (宏泰58號) and its Chinese crew were detained after the Taipei-Penghu No. 3 submarine cable was severed. When the Coast Guard Administration (CGA) first attempted to detain the ship on grounds of possible sabotage, its crew said the ship’s name was Hong Tai 168, although the Automatic Identification System (AIS)
CHANGE OF MIND: The Chinese crew at first showed a willingness to cooperate, but later regretted that when the ship arrived at the port and refused to enter Togolese Republic-registered Chinese freighter Hong Tai (宏泰號) and its crew have been detained on suspicion of deliberately damaging a submarine cable connecting Taiwan proper and Penghu County, the Coast Guard Administration said in a statement yesterday. The case would be subject to a “national security-level investigation” by the Tainan District Prosecutors’ Office, it added. The administration said that it had been monitoring the ship since 7:10pm on Saturday when it appeared to be loitering in waters about 6 nautical miles (11km) northwest of Tainan’s Chiang Chun Fishing Port, adding that the ship’s location was about 0.5 nautical miles north of the No.
An Akizuki-class destroyer last month made the first-ever solo transit of a Japan Maritime Self-Defense Force ship through the Taiwan Strait, Japanese government officials with knowledge of the matter said yesterday. The JS Akizuki carried out a north-to-south transit through the Taiwan Strait on Feb. 5 as it sailed to the South China Sea to participate in a joint exercise with US, Australian and Philippine forces that day. The Japanese destroyer JS Sazanami in September last year made the Japan Maritime Self-Defense Force’s first-ever transit through the Taiwan Strait, but it was joined by vessels from New Zealand and Australia,
COORDINATION, ASSURANCE: Separately, representatives reintroduced a bill that asks the state department to review guidelines on how the US engages with Taiwan US senators on Tuesday introduced the Taiwan travel and tourism coordination act, which they said would bolster bilateral travel and cooperation. The bill, proposed by US senators Marsha Blackburn and Brian Schatz, seeks to establish “robust security screenings for those traveling to the US from Asia, open new markets for American industry, and strengthen the economic partnership between the US and Taiwan,” they said in a statement. “Travel and tourism play a crucial role in a nation’s economic security,” but Taiwan faces “pressure and coercion from the Chinese Communist Party [CCP]” in this sector, the statement said. As Taiwan is a “vital trading
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