European Stocks Fall, Led by BHP, Daimler; U.S. Futures Drop

By Adria Cimino

July 24 (Bloomberg) -- European stocks fell after German business confidence sank the most since September 2001 and lower commodity prices hurt mining and energy shares. U.S. index futures retreated, while Asian shares advanced.

BHP Billiton Ltd., the world's biggest mining company, fell to a three-month low. Total SA, Europe largest oil refiner, slipped for the first time this week. ABB Ltd. slumped the most in four months as the world's biggest builder of electricity grids posted earnings that missed analysts' estimates. Daimler AG tumbled 10 percent after the carmaker cut its profit forecast, while Ford Motor Co. fell in German trading after its earnings disappointed. EasyJet Plc led airlines lower, saying earnings will slide as much as 46 percent.

Europe's Dow Jones Stoxx 600 Index lost 0.9 percent to 284.24 at 1:35 p.m. in London. The index closed yesterday at the highest this month.

``The market had been getting ahead of itself in the last couple of days,'' said Peter Jarvis, the London-based director of European equities at F&C Asset Management, which oversees about $200 billion. ``Daimler was disappointing, and it's made people reassess'' results, he said.

Futures on the Standard & Poor's 500 Index slipped 0.2 percent. The MSCI Asia Pacific Index rose 1.4 percent as Sony Corp. advanced.

The Stoxx 600 has dropped as much as 26 percent this year on concern accelerating inflation and more than $460 billion in credit-related losses worldwide will stifle economic and profit growth. Better-than-expected earnings by companies from Volkswagen AG to Nokia Oyj sparked a rebound from a three-year low on July 15 that has trimmed declines in the pan-European benchmark index to 22 percent.

Jobless Claims

Stocks extended declines after a report showing the number of Americans filing first-time claims for unemployment benefits rose last week to the highest in almost four months, a sign the slowing economy is weakening the labor market.

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.

``We expect things to deteriorate over the next six months,'' said Gonzalo Lardies, a fund manager in Madrid at LCF Rothschild Group, which oversees $145 billion worldwide.

National benchmark indexes fell in all of the 18 western European markets except Iceland and Luxembourg. The U.K.'s FTSE 100 slipped 0.7 percent with Rio Tinto Group and BP Plc declining. France's CAC 40 also decreased 0.7 percent, and Germany's DAX lost 0.9 percent. Credit Suisse Group AG led an advance in Switzerland after reporting earnings that topped estimates.

Confidence Slumps

Business confidence in Germany, Europe's largest economy, slipped the most since the Sept. 11 terrorist attacks in 2001, signaling growth is faltering. The Ifo institute said its business climate index fell to 97.5 from 101.2 in June. Economists expected a drop to 100.1, based on a Bloomberg survey.

``Today's data confirmed that global economic growth is slowing down, which adds to investors' uncertainty,'' said Robert Halver, head of research at Baader Bank in Frankfurt.

BHP sank 1.2 percent to 1,597 pence. Rio Tinto, the world's third-biggest mining company, fell 1 percent to 5,047 pence.

Gold traded at its lowest in more than two weeks in Asia after the U.S. dollar rallied to a two-week high against the euro, paring demand for the metal as hedge against inflation.

Total lost 2.2 percent to 47.98 euros. BP, Europe's second- biggest oil company, slid 1.8 percent to 512.25 pence.

Oil rebounded from a seven-week low as traders viewed this week's 3 percent decline as an opportunity to buy futures contracts.

ABB, Daimler

ABB fell 5.4 percent to 28.6 francs. Second-quarter profit rose 34 percent to $975 million as nations from the U.S. to China invested in power networks. Analysts in a Bloomberg survey estimated earnings of $982 million.

Daimler fell 10 percent to 38.23 euros. The world's second- biggest luxury carmaker cut its full-year forecast for earnings before interest and taxes. The company said second-quarter profit fell 25 percent to 1.395 billion euros because of charges related to former unit Chrysler. Six analysts surveyed by Bloomberg News had forecast profit of 1.38 billion euros.

Ford dropped 54 cents to $5.49 in Germany. The world's third- largest automaker posted a wider-than-expected second-quarter loss and said it will convert three truck factories to produce small cars as rising gasoline prices sap U.S. truck sales.

``I personally wouldn't buy auto stocks,'' said Andy Brough, a fund manager at Schroder Investment Management in London, which has about $12.7 billion. ``Even if oil goes to $100 a barrel, the outlook for profits in the oil companies is a lot more favorable than the outlook for autos.''

Renault, EasyJet

Renault SA lost 3.7 percent to 55.73 euros. France's second- largest carmaker slashed its 2009 unit-sales target and pledged cuts in production costs and jobs to meet profit goals, amid soaring raw material prices and flagging European auto markets.

EasyJet, Europe's second-biggest discount airline, fell 8.9 percent to 337 pence after saying fiscal-year pretax profit will slump as much as 46 percent because of higher fuel expenses. Pretax earnings for the year through Sept. 30 will be 110 million pounds ($220 million) to 120 million pounds.

Ryanair Holdings Plc, Europe's largest discount carrier, slipped 3.2 percent to 3.28 euros. Air France-KLM Group, the region's biggest airline, sank 4.1 percent to 16.20 euros.

McDonald's Corp., the biggest restaurant company, lost 92 cents to $58.74 in Germany. Deutsche Bank analysts led by Jason West lowered their recommendation on the shares to ``hold'' from ``buy,'' writing that higher beef costs and fewer customer visits may reduce profitability.

Amazon, Baidu

Amazon.com Inc., the world's largest Internet retailer, reported second-quarter profit more than doubled as customers bought more toys and electronics overseas. Full-year sales may exceed its previous forecast, the company said in a statement. Amazon shares climbed $5.06 to $75.60 in Germany.

Baidu.com Inc. gained $41.99 to $330.69 in Germany after China's most-used search Web site reported an 87 percent increase in second-quarter profit, beating analysts' estimates.

Sony, the maker of the Playstation 3 game machine, gained 3.9 percent to 4,550 yen.

Stora Enso Oyj slipped 9 percent to 5.85 euros. Europe's largest paper company said second-quarter profit fell 84 percent, missing estimates, on higher wood costs and weaker demand for lumber.

Credit Suisse Group AG climbed 5.2 percent to 52.5 francs. Second-quarter earnings dropped less than analysts estimated as the investment banking unit returned to profit. Net income fell to 1.22 billion Swiss francs ($1.18 billion). That beat the 617 million-franc median estimate of 14 analysts surveyed by Bloomberg.

Rising Costs

Svenska Cellulosa AB plunged 7.6 percent to 72.75 kronor. Europe's biggest tissue maker said second-quarter profit fell 12 percent to 1.38 billion kronor ($229 million) as an economic slowdown in the U.S. and parts of Europe prevented it from passing on rising energy, fiber and chemical costs.

Metso Oyj sank 15 percent to 23.67 euros. The world's biggest maker of rock crushers and paper mills cut its full-year sales growth forecast to the range of 5 percent to 10 percent. Second-quarter pretax profit was 145 million euros, missing analysts' estimates.

Yell Group Plc surged 16 percent to 82.5 pence. The publisher of the U.K.'s Yellow Pages phone directory said fiscal first-quarter profit rose 5.5 percent to 36.2 million pounds after it expanded its Internet business and cut costs.

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