By Barbara Kollmeyer, MarketWatch
LONDON (MarketWatch) -- 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.
Shares of Celesio AG gained 3.7%, the biggest gainer on the main
European index. On Thursday, U.S. drug-distribution group McKesson
Corp. (MCK) 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 (SNY) 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 (NVS) 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 (SAN) lost 3.5% and BBVA SA (BBVA) 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) 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.
More must-reads from MarketWatch:
After devaluation, Argentina eases U.S. dollar restrictions
Latest from Davos: BOE to revise guidance in Feb.
Boehner chooses golf, wine over White House, and more
must-reads
Subscribe to WSJ: http://online.wsj.com?mod=djnwires