European Stocks Cap Longest Monthly Losing Streak Since 2002

Feb. 28 (Bloomberg) -- European stocks dropped for a sixth straight month, the longest losing streak since 2002, on concern the worsening global economic slump will wipe out earnings.

Novartis SA, Switzerland’s second-biggest drugmaker, slid 6.4 percent this past week after saying first-quarter profit will be hurt, and Basilea Pharmaceutica AG tumbled 49 percent after reporting a full-year loss. Renault SA, France’s second-largest carmaker, fell 9.4 percent as its credit ratings were cut to junk by Moody’s Investors Service. Compania Espanola de Petroleos SA sank 44 percent after Banco Santander SA said it may sell its holding in Spain’s second-largest oil company.

The Dow Jones Stoxx 600 Index slipped 2.3 percent to 172.92 this past week, bringing the February slump to 9.6 percent. The measure has fallen 52 percent since the start of 2008 as credit- related losses at financial firms worldwide reached $1.1 trillion and Europe, the U.S. and Japan fell into the first simultaneous recessions since World War II.

“There is reason to be worried,” said Kilian de Kertanguy, a Paris-based fund manager at Cholet-Dupont Gestion, which oversees about $2.3 billion. “Everyone is saying there won’t be good news in the market during the first half.”

The U.S. economy shrank in the fourth quarter of 2008 at a faster pace than previously estimated as consumer spending plunged, companies cut inventories and exports sank. Gross domestic product contracted at a 6.2 percent annual pace from October through December, more than economists anticipated and the most since 1982, according to revised Commerce Department figures Feb. 27.

European Economy

German business confidence declined to a 26-year low in February, a report by the Ifo institute showed this past week. The U.K. economy contracted the most since 1980 in the fourth quarter as the financial crisis prompted spending by consumers and companies to shrivel, according to data from the Office for National Statistics.

National benchmark indexes fell in 15 of the 18 western European markets this week. Germany’s DAX Index lost 4.3 percent as Deutsche Post AG dropped, while France’s CAC 40 retreated 1.8 percent. The U.K.’s FTSE 100 slipped 1.5 percent, with Royal Bank of Scotland Group Plc limiting the decline.

Health-care shares retreated 7.2 percent as a group, the second-worst performance among 19 industries in the Stoxx 600 after automotive companies.

Novartis decreased 6.4 percent this past week. Operating and net income growth for the three months ending March 31 probably will slow because of “adverse currency movements and the stronger U.S. dollar,” the company said.

Basilea, Roche

Basilea plunged 49 percent after the Swiss developer of anti-infection drugs reported a full-year loss and said a regulatory review of its Ceftobiprole treatment was delayed.

Roche Holding AG declined 5.9 percent on concern copies of costly biotechnology medicines made by Roche’s American subsidiary Genentech Inc. would be allowed in the U.S. with few delays under a proposal made by President Barack Obama this week.

Renault slid 9.4 percent as Moody’s cut its long-term credit rating to Ba1, the first grade into junk, from Baa2, citing “significantly worse operating performance and negative free cash flow” in 2008.

Automotive companies declined 11 percent as a group amid concern the worsening recession will cut demand. Volkswagen AG, Europe’s biggest carmaker, slid 16 percent. Daimler AG, the world’s largest truckmaker, retreated 12 percent.

Compania Espanola de Petroleos, also known as Cepsa, tumbled 44 percent after Santander said it may sell its holding in the company for as much as 3 billion euros ($3.8 billion).

Earnings Reports

EFG International AG retreated 36 percent as the Swiss private bank, whose largest shareholder is Greece’s Latsis family, reported a 69 percent drop in second-half profit.

Deutsche Post lost 13 percent after Europe’s biggest mail carrier reported a fourth-quarter net loss, cut its dividend and forecast further volume declines for 2009.

Accor SA slipped 5.1 percent as Europe’s largest hotelier posted earnings that missed analysts’ estimates, said demand for rooms continued to worsen in January and indicated its debt may rise from buying a stake in a casino business.

Randstad Holding NV slid 21 percent. The world’s second- biggest staffing company reported a fourth-quarter loss and canceled its dividend as companies cut back on temporary workers.

Earnings at companies in the Stoxx 600 are expected to rise 14 percent this year following a 37 percent slump in 2008, according to analysts’ estimates compiled by Bloomberg.

RBS, the largest bank controlled by the U.K. government, surged 20 percent on plans to put 325 billion pounds ($466 billion) of investments into a state insurance program and shift toxic assets to a new unit after posting the biggest loss in British history.

Bank Shares

In the U.S., President Obama’s first budget proposal this week asked for as much as $750 billion in new funds to shore up the financial system.

Banks in the Stoxx 600 climbed a combined 2.8 percent. The sub-index, which is down 25 percent so far this year, pared its weekly advance after the U.S. Treasury agreed to a third rescue attempt for Citigroup Inc. that will cut existing shareholders’ stake in the company by 74 percent.

“It’s a difficult environment for banks,” Julien Quistrebert, who helps manage $5.1 billion at KBL Richelieu Gestion in Paris, said in a Bloomberg Television interview. “We’re still very cautious. The industry is like a black box.”