European Stocks Decline; Munich Re, Hannover Re, UBS Retreat

By Adria Cimino

July 25 (Bloomberg) -- European stocks fell for the third day this week on concern losses in financial services may worsen and slowing economies will stifle profit growth.

Munich Re slumped the most in five years after the world's second-biggest reinsurer warned of ``substantial'' writedowns on its stock investments. Hannover Re fell the most since January. UBS AG slipped after New York sued the bank on allegations its promotion of auction-rate securities was fraudulent. PagesJaunes SA led media companies lower after cutting its sales forecast because of ``a more difficult economic environment.''

The Dow Jones Stoxx 600 Index declined 0.3 percent to 281.38 at 2:56 p.m. in London, trimming this week's gain to 0.2 percent this week. The Stoxx 50 slipped 0.3 percent today, and the Euro Stoxx 50, a measure for the euro zone, lost 0.4 percent.

``What makes investors so uncertain is the question: which financial firms have more skeletons in the closet,'' said Juergen Meyer, a Frankfurt-based fund manager at SEB Asset Management, with the equivalent of $2.2 billion under management.

Stocks pared losses after a report showed orders for U.S. durable goods unexpectedly rose in June and consumer confidence increased in July.

Financial stocks have led the rout that has erased more than $13 trillion from equities worldwide since October as accelerating inflation and $468 billion in writedowns and credit-related losses threaten to push the U.S. into recession.

``There are still risks on bank finances,'' said Nathalie Pelras, a Paris-based fund manager at Richelieu Finance, which oversees $6.3 billion. ``Growth for companies will weaken as the economy slows.''

Except for Canada, all of the 23 developed markets in the MSCI World Index experienced bear market plunges of at least 20 percent this year.

Munich Re, Hannover Re

Analysts estimate earnings for companies in the Stoxx 600 will drop 2.4 percent in 2008, Bloomberg data show. That's down from 11 percent growth predicted at the start of the year.

National benchmark indexes fell in all of the 18 western European markets except France. The CAC 40 gained 0.1 percent. Germany's DAX lost 0.7 percent, while the U.K.'s FTSE retreated 0.6 percent.

Munich Re sank 9.6 percent to 105.30 euros. The company cut its forecast for earnings this year after second-quarter profit declined 48 percent.

Hannover Re, Germany's second-biggest reinsurer, plunged 7.3 percent to 29.95 euros. The company said it has become more difficult to reach its full-year targets because of capital- market turbulence.

Storebrand, UBS

Storebrand ASA, Norway's largest publicly traded insurer, sank 9.4 percent to 35.35 kroner.

U.S. foreclosure filings more than doubled in the second quarter from a year earlier as falling home prices left borrowers owing more on mortgages than their properties were worth, according to RealtyTrac Inc.

Home sales slid more than forecast a report yesterday showed and investor Bill Gross predicted the housing slump will cost banks and brokerages $1 trillion.

UBS tumbled 6.7 percent to 21.46 francs. The European bank hardest hit by subprime contagion was sued yesterday by New York Attorney General Andrew Cuomo, alleging the bank's promotion of auction-rate securities as safe, money market-like investments was fraudulent.

UBS spokeswoman Karina Byrne in an e-mailed statement said the bank will ``vigorously defend'' itself against the allegations in the suit, and ``categorically rejects any claim that the firm engaged in a widespread campaign'' to shift auction-rate debt off its books and into client accounts.

PagesJaunes, Rentokil

PagesJaunes slumped 5.9 percent to 8.74 euros. The French yellow-pages company bought by Kohlberg Kravis Roberts & Co. said sales this year will rise 3 percent to 4 percent, down from a previous target of 5 percent growth. PagesJaunes cited ``a more difficult economic environment.''

Rentokil Initial Plc tumbled 32 percent to 69.5 pence. The world's largest pest-control provider cut its forecast for annual profit after margins at its washroom services division shrank.

Groupe Danone SA gained 6.2 percent to 47.64 euros. Europe's biggest maker of baby food said first-half profit rose 5.7 percent after the purchase of Royal Numico NV last year boosted sales of infant formula in Asia and the Middle East. Net income from continuing operations climbed to 701 million euros. That surpassed analysts' estimates.

YIT Oyj plunged 23 percent to 10.50 euros. Finland's biggest builder, said second-quarter profit fell 19 percent to 42.6 million euros, missing analysts' estimates, on a slowing Baltic real estate market and delays to a Russian project.

Cie. de Saint-Gobain SA, Europe's biggest supplier of building materials, added 6 percent to 38.87 euros after cutting its 2008 forecast and announcing 4,000 job cuts because of the construction slowdown.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.