European Stocks, U.S. Futures Fall; Banks, Airlines Lead Drop

By Sarah Thompson

July 28 (Bloomberg) -- European stocks and U.S. index futures fell as concern deepened credit losses and the economic slowdown will hurt earnings. Most Asian shares advanced.

HBOS Plc and Deutsche Bank AG retreated after Australia & New Zealand Banking Group Ltd. forecast its steepest full-year profit drop since 1992 as bad loans swell. Australia's fourth-biggest bank tumbled the most since 1987, while JPMorgan Chase & Co. fell in Germany. Ryanair Holdings Plc, Europe's largest discount airline, slumped 15 percent after saying it may post its first full-year loss since going public in 1997 on higher fuel costs. British Airways Plc and Deutsche Lufthansa AG also declined.

``If you're looking for good news from the banking sector I suggest you go on holiday because it is just not going to be there,'' Howard Wheeldon, senior strategist at BGC Partners LP in London, said in a Bloomberg Television interview.

Europe's Dow Jones Stoxx 600 Index slipped 0.8 percent to 279.56 at 10:58 a.m. in London, while futures on the Standard & Poor's 500 Index sank less than 0.2 percent. The MSCI Asia Pacific Index increased less than 0.1 percent, with three stocks advancing for every two that fell as gains by commodity producers countered declines among banks.

Financial stocks have led a rout that has erased more than $11 trillion from global equities as more than $460 billion in credit-related losses and accelerating inflation hurt the outlook for economic and profit growth.

Analysts estimate earnings for companies in the Stoxx 600 will fall 2.6 percent in 2008, Bloomberg data show. That's down from 11 percent growth predicted at the start of the year.

Profit at S&P 500 companies sank 16 percent in the second quarter, the fourth straight decline, according to analysts' estimates. That would be the longest streak in six years, Bloomberg data show.

Bear Markets

Of the 63 S&P 500 companies that have provided outlooks this quarter, 30 said profits will fall, Bloomberg data show.

All of the 23 developed nations in the MSCI World Index except for Canada have experienced bear-market plunges of 20 percent or more since September as credit losses surged and record commodity prices stoked inflation.

HBOS, the U.K.'s largest mortgage lender, slid 5.1 percent to 294.5 pence. Deutsche Bank, Germany's biggest bank, slipped 0.9 percent to 59.02 euros.

ANZ's earnings per share excluding income from derivatives trading will decline 20 percent to 25 percent in the 12 months to Sept. 30, the Melbourne-based company said. Chief Executive Officer Mike Smith, who joined ANZ bank from HSBC Holdings Plc in October, said the company tripled provisions for delinquent loans from a year earlier.

ANZ dropped 11 percent to A$15.81.

`Looking Sick'

Commonwealth Bank of Australia, the nation's largest lender, slumped 5 percent to A$41.10.

JPMorgan, the second-largest U.S. bank by market value, slipped 10 cents to $39.42 in Germany.

``The banking sector is looking sick across the board and ANZ's forecast serves to highlight this,'' said Oliver Stevens, head of dealing at IG Markets in Melbourne.

Royal Bank of Scotland Group Plc, the U.K.'s-second biggest bank, dropped 2.1 percent to 210.5 pence. RBS may abandon the sale of its U.K. insurance division because of waning interest from buyers, the Financial Mail reported, without saying where it got the information.

Lloyds TSB Group Plc fell 23 percent to 323.75 pence after analysts at Cazenove said Britain's largest provider of checking accounts may slash its full-year dividend by as much as 40 percent as bad loans increase.

Long-Term Challenge

The bank faces a ``long-term challenge'' in maintaining its capital position because loan impairments are likely to rise over the next 12 months, wrote London-based analysts led by Simon Pilkington, who has an ``in-line'' rating on the stock. As a result, the bank may not be able to pay a dividend similar to the 39.5 pence a share it paid in 2007.

Ryanair sank 15 percent to 2.73 euros. Net income excluding writedowns fell 85 percent to 21 million euros ($33 million) in the three months ended June 30. Analysts had predicted profit of 50.9 million euros.

The carrier, struggling with record oil prices and a slowdown in consumer spending, expects an annual result of between breakeven and a loss of 60 million euros.

British Airways, Europe's third-largest airline, dropped 4.9 percent to 234.75 pence.

Lufthansa slid 1.8 percent to 15.17 euros. Europe's second- biggest airline's operations at Frankfurt and Hamburg face disruption today as its employees begin a walkout over pay.

TNT, Deutsche Post

TNT NV sank 8.7 percent to 21.89 euros after Europe's second-largest express-delivery company said second-quarter profit declined 16 percent, hurt by currency fluctuations and lower earnings at the mail division.

Net income fell to 205 million euros from 244 million a year earlier. Analysts surveyed by Bloomberg had expected 224 million euros.

Deutsche Post AG, Europe's biggest mail carrier, lost 1.4 percent to 15.69 euros.

Pearson Plc gained 3 percent to 613.5 pence. The publisher of the Financial Times newspaper said its first-half loss narrowed from a year earlier on a smaller deficit from discontinued operations.

Acambis Plc climbed 60 percent to 186 pence after Sanofi- Aventis SA agreed to buy the U.K. company for 276 million pounds ($549 million) in cash. Sanofi-Aventis, France's largest drugmaker, slipped 0.8 percent to 46.81 euros.

BHP Billiton Ltd., the world's largest mining company, increased 3.2 percent to 1,602. Cheuvreux raised its recommendation to ``outperform'' from `underperform'' before its full-year results on Aug. 18.

``We expect full-year earnings before interest, taxes, depreciation and amortization of $27.4 billion, with a strong outlook on metal demand and prices for 2009,'' the brokerage said in a note to clients.

To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net