European Stocks Drop for Third Week

European stocks slumped to their lowest in almost two months this week, paced by commodity producers as metal and oil prices fell.

Boliden AB, Europe's third-biggest copper refiner, and Anglo American Plc, the world's second-largest mining company, led commodity stocks lower. Porsche AG dropped as the weak dollar hurt the value of U.S. sales translated into euros.

The picture is dimming for commodity stocks, said Herbert Perus, who helps oversee the equivalent of $57 billion as head of global equities at Raiffeisen Capital Management in Vienna. The word recession is heard more and more often from the U.S. It's a very sentiment-driven market with a lot of scared investors.

The Dow Jones Stoxx 600 Index declined 1.3 percent this week. The benchmark has fallen 9 percent since reaching a 6 1/2- year high June 1 because of concern defaults among U.S. mortgage borrowers with the poorest credit profiles will hurt the rest of the economy.

It's reasonable to stay out of the energy sector as oil is clearly at a peak and companies benefiting from high crude prices are going to have a negative impact going forward, said Giorgio Mascherone, chief investment officer at Deutsche Bank SpA in Milan, which manages the equivalent of $46 billion.

Stoxx 600 basic resources shares lost 7 percent this week, the biggest decline in more than 3 months.

Crude Declines

Crude prices fell 1.8 percent this week in London after imports increased to 10.5 million barrels a day last week, the highest in almost three months, and added an extra 2.81 million barrels to U.S. crude-oil stockpiles, the Energy Department said Nov. 15. A 750,000 barrel-decline was forecast by analysts.

Zinc dropped to the lowest in almost 20 months. Lead slid to an eight-week low.

National benchmarks fell in 14 of the 18 western European markets. Germany's DAX Index lost 2.6 percent for the week, France's CAC 40 was little changed. The U.K.'s FTSE 100 fell 0.2 percent. The Stoxx 50 decreased 0.4 percent, and the Euro Stoxx 50, a measure for the euro region, also retreated 0.4 percent.

Boliden dropped 11.5 percent this week, as did Anglo American.

Kloeckner & Co. AG fell 6.3 percent. The German steel trader said Nov. 14 nine-month profit dropped after steel prices slumped. Prices have held steady this quarter, the company said. Net income dropped 35 percent to 114.6 million euros ($168 million).

Cold-rolled stainless steel, which is used in electrical appliances and construction, has fallen 30 percent in the past six months to 950 euros a metric ton, according to data from Steel Business Briefing. Kloeckner said it expects prices to remain stable or to rise slightly on good demand.

ThyssenKrupp AG, Germany's largest steelmaker, lost 9.2 percent and Salzgitter AG, the country's second-biggest, declined 9 percent.

Norsk Hydro ASA, the world's fourth-largest aluminum producer, retreated with the price of the metal. The stock declined 9 percent. Aluminum dropped 2.3 percent, the biggest weekly loss in more than a month.

Basic resources have been one of the most volatile sectors in the recent past, due to the underlying metal prices, which have been riding the roller coaster, said Christoph Berger, a fund manager at Cominvest Asset Management in Frankfurt, who helps manage $63 billion of European stocks.

Porsche AG, maker of the 911 sports car, lost 15 percent. The carmaker's main auto operations fell short of analysts' estimates. Operating profit fell to about 1 billion euros in the 12 months through July from about 1.2 billion euros a year earlier, excluding gains from its stake in Volkswagen AG, Porsche said Nov. 12.

Earnings were partly curbed by the weaker dollar. UBS AG said Nov. 13 a decline in the U.S. currency hurt the company's full-year income more than expected.

K+S AG plunged 12.2 percent after Europe's largest producer of potash used in fertilizers cut its profit forecast. A sliding U.S. dollar erodes the outlook for operating income and sales this year. Syngenta AG, the biggest maker of agricultural chemicals, and Yara International AG, the largest fertilizer maker, also fell this week after K+S cut full-year estimates.

Alfa Laval AB tumbled 22.4 percent after the world's largest maker of heat exchangers said orders missed projections last month.

Vodafone Group Plc rose 6.7 percent. The world's biggest provider of mobile-phone services on Nov. 13 raised its sales and profit forecasts on accelerating growth in India and Turkey, as well as higher revenue from wireless Internet access in Europe.

Net income in the six months to Sept. 30 was 3.29 billion pounds ($6.8 billion), or 6.19 pence a share, compared with a year-earlier loss of 5.1 billion pounds, or 8.88 pence, Vodafone wrote Nov. 16 in a statement. Profit beat the median estimate of 3.03 billion pounds in a Bloomberg News survey of analysts.

Vodafone is a good performance indicator for the entire telecommunication services market, said Cominvest's Berger.

Barclays Plc led gains by bank stocks after the U.K.'s third-biggest lender wrote down about 1.3 billion pounds of credit-related securities tied to the U.S. subprime-mortgage market collapse.

Net charges and writedowns were 500 million pounds in the third quarter and 800 million pounds in October, the bank said Nov. 15.

The kind of transparency Barclays showed increases the amount of trust in the markets. The sooner this is done, the better, and this was a step in right direction, said Berger. The shares advanced 7.3 percent.

Source - Bloomberg