By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets posted losses for
a second-straight week on Friday after solid U.S. jobs data last
week and a budget deal in Washington fueled speculation that the
Federal Reserve could reduce its asset purchases as early as next
week.
The Stoxx Europe 600 index dropped 0.2% to close at 309.75,
extending its weekly loss to 2.1%.
Shares of Peugeot SA slid 12% after General Motors Co. (GM.XX)
late Thursday said it is selling its entire 7% stake in the French
car maker. At the same time, the company said it has no plans to
discontinue its current collaborative programs with the troubled
French car maker. The decline built on a 7.6% drop from Thursday,
when Peugeot said it would take a 1.1 billion euro ($1.5 billion)
impairment charge.
RSA Insurance Group PLC slumped 7.2% after Chief Executive Simon
Lee resigned and the company warned that its troubled Irish unit
will hit 2013 earnings.
On a more upbeat note, shares of ARM Holdings PLC (ARMHY) rose
3% after Bloomberg reported that Google Inc. (GOOG) is considering
making its own server processors, using technology from the U.K.
chip designer.
More broadly, investors in Europe tracked political and economic
developments in the U.S. to gauge whether they strengthen the case
for the Federal Reserve to slash its bond buys at its meeting next
week. The House on Thursday passed a budget bill designed to avoid
a government shutdown next month, which further could clear the way
for the Fed to start the tapering process. Approval is expected to
pass the Senate next week.
Many analysts expected the Fed to start tapering already in
September, but political gridlock was a key reason it refrained
from reducing its bond buys. With unemployment also in an improving
trend now, the biggest stumbling blocks appear to have been
resolved, leaving the meeting on Dec. 17-18 a close call, according
to analysts.
"In contrast with what happened over the summer, the market now
seems very much prepared for Fed tapering. Risk markets have coped
well with the stronger data that have increased the odds of Fed
tapering and the effect on emerging markets has also been very
limited. The biggest correction recently has been in European
stocks," said analysts at Danske Bank in a note to clients.
"We believe that the effects on markets from actual tapering
will be fairly limited -- especially because it will likely be
balanced with stronger forward guidance. This is what the Fed will
try to accomplish and we believe it will succeed," they added.
Stocks in the U.S. dropped for a third day on Thursday and
traded mixed on Friday.
In Europe, the U.K.'s FTSE 100 index inched 0.1% lower to
6,439.96 and closed out the week with a 1.7% loss.
France's CAC 40 index fell 0.2% to 4,059.71 for a 1.7% weekly
decline. Germany's DAX 30 index slipped 0.1% to 9,006.46, ending
the week 1.8% lower.
Shares of AstraZeneca PLC rose 1.8% in London after the drug
maker said an experimental gout drug met its goal in a late-stage
clinical trial.
Adding pressure in London, oil firms declined as oil prices
dropped and UBS cut the oil and gas sector to neutral from
overweight. Royal Dutch Shell PLC (RDSB) dropped 1% and BP PLC (BP)
lost 1.1%.
Thomas Cook Group PLC slid 3.2% after Nomura cut the travel
operator to reduce from neutral. The analysts expressed concerns
about the management's margin targets and said the recent
outperformance was due to headlines and "low-hanging fruit".
In Milan, Snam SpA gained 2.8% after UBS lifted the natural-gas
firm to buy from neutral.
In the same vein, Storebrand ASA lost 3.3% in Oslo after Morgan
Stanley cut the insurance firm to equal weight from overweight.
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