Europe Week
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Europe's week ahead: Busy start to 2014

Europe’s week ahead: Busy start to 2014

Europe?s benchmark stock index posted the biggest weekly loss in seven months on Friday, reflecting a week where weak Chinese data created fresh concerns about an economic slowdown with a negative spillover to other emerging markets.

Banks and drug stocks were the biggest losers, though shares of Celesio AG were up on buyout news.

Decliners swamped gainers on the Stoxx Europe 600 index, which lost 2.4% to close at 324.75. On the week, the benchmark gave up 3.3%, marking the worst weekly performance since June.

Italy’s Economy Minister Fabrizio Saccomanni pushes back against criticism that the pace of reform in Italy is too slow,

Shares of Celesio AG ?gained 3.7%, the biggest gainer on the main European index. On Thursday, U.S. drug-distribution group?McKesson Corp?. ?said it had an agreement from German conglomerate Franz Haniel & Cie, a major shareholder in Celesio, to sell its 50% stake in the company for 23.50 euros a share. McKesson also persuaded Elliott Management to release convertible bonds in the company.

Among other stocks, shares of Sanofi SA ??slid 4.2% after the pharmaceutical group was cut to neutral from buy at Citigroup, where analysts said consensus downgrades are likely, given recent pipeline/divisional disappointments.

Also in the drug space, shares of Novartis AG?dropped 3%. The company said it would request re-examination of its Serelaxin treatment in acute heart failure for conditional marketing-authorization in the EU, following a negative opinion from the European Medicines Agency?s Committee for Medical Products for Human Use.

 

The broader negative sentiment in Europe mirrored sharp declines in?Asia?and?the U.S., as renewed uncertainty about a potential ?hard landing? in China ignited a wider flight to safe-haven assets and an escape from riskier investments, such as equities. Chinese manufacturing data earlier this week showed the?sector unexpectedly contracted in January. The disappointment added to existing headwinds for emerging markets, such as Fed tapering and high political uncertainty in countries such as Thailand, Turkey and Ukraine, and sparked sharp declines in their currencies.

?The?renewed EM wobble?comes at a time when many risk markets are technically in overbought territory and hence vulnerable to correction,? analysts at Danske Bank said in a note.

?We could very well see a further correction in risk assets as investors take some profit due to the heightened uncertainty,? they added.

The biggest losses were seen in Spain, where the IBEX 35 index tumbled 3.6% to 9,868.90, logging a 5.7% drop on the week. Banco Santander SA ?lost 3.5% and BBVA SA ??gave up 5.1% amid a currency crisis in Argentina in which the?central bank reportedly gave up its fight to support the peso. Spain has deep ties to Latin America, and its banks are particularly active there.

The banking sector fell sharply across Europe, with HSBC Holdings PLC?HSBC?1.99% ?down 2% and Credit Suisse Group AG off 3%.

Within other indexes, the German DAX 30?fell 2.5% to 9,392.02, for a 3.6% weekly decline. The U.K.?s FTSE 100 index ?lost 1.6%?to 6,663.74 and closed out the week 2.4% lower. The French CAC 40 index, ?moved down 2.8% to 4,161.47 and fell 3.8% on the week.

From Davos and the?World Economic Forum?late on Thursday,?Bank of England Gov. Mark Carney signaled?in a television interview that?interest rates?won?t need to rise immediately despite the unemployment rate falling to within 0.1 percentage point of the 7% threshold he previously said would trigger consideration of a hike.

Source MarketWatch

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