EUROPEAN stocks posted their biggest weekly decline in more than two months last week after a surge in crude oil to a record US$135 a barrel sparked concern that higher fuel costs will curb profits at airlines and auto makers.
Air France-KLM Group tumbled the most since the week of September 11, 2001, after Europe's largest airline posted its first quarterly loss since 2003. British Airways Plc dropped the most in six months. Porsche SE led a retreat in car makers as Merrill Lynch & Co recommended investors sell the shares and Ford Motor Co abandoned a target of returning to profit next year.
Europe's Dow Jones Stoxx 600 Index lost 3.3 percent to 319.02, the steepest weekly decline since March. The measure is down 13 percent this year as concern that record oil prices, inflation and US$383 billion in credit losses will curb economic and profit growth, Bloomberg News said.
"Investors are worried that this week's spike in oil prices is a structural move, rather than just a temporary spike," said Tony Dolphin, director of strategy and economics at Henderson Global Investors in London, which oversees about US$125 billion. "Unsurprisingly, the focus has been on those sectors where earnings would be hardest hit, such as airlines and autos."
Crude oil for July delivery rose more than 5 percent last week, touching US$135.09, the highest since trading began in 1983. Prices have doubled over the last year, aided by a falling US dollar and higher global demand for raw materials.
National benchmarks dropped in all 18 western European markets except Norway. Germany's DAX Index slipped 3 percent, France's CAC 40 fell 2.8 percent and the UK's FTSE 100 sank 3.4 percent. The Stoxx 50 lost 3.4 percent and the Euro Stoxx 50, a measure for the euro region, slid 3.6 percent.
Investors may face further stock-market losses, according to options traders on the Eurex derivatives exchange.
Air France-KLM lost 18 percent after the airline posted a fourth-quarter loss of 542 million euros (US$855 million). British Airways tumbled 11 percent.