Stocks Decline in Europe, Asia; U.S. Index Futures Advance

By Adria Cimino

July 1 (Bloomberg) -- Stocks fell in Europe and Asia as higher oil prices weighed on the earnings outlook for carmakers and reports on housing and manufacturing suggested the global economy will slow further. U.S. index futures advanced.

Volkswagen AG, Europe's biggest automaker, and Ryanair Holdings Plc, the region's largest discount airline, retreated. Societe Generale SA and ING Groep NV led financial shares lower in Europe, and Sumitomo Mitsui Financial Group Inc. fell in Tokyo.

The MSCI World Index lost 0.3 percent to 1,398.31 at 8:05 a.m. in London, while futures on the Standard & Poor's 500 Index rose 0.1 percent. Europe's Dow Jones Stoxx 600 Index declined 0.3 percent, extending its worst first-half performance since at least 1987. The MSCI Asia Pacific Index slipped 0.5 percent.


Most U.S. stocks fell yesterday on concern deepening mortgage losses will force more banks to cut dividends or sell shares at a discount. Billionaire investor Eli Broad said the world's largest economy is in the `worst period' of his adult life.

``Improvement in the U.S. economy is slow -- slower than we thought,'' Jean-Paul Pierret, a strategist at Dexia Securities France in Paris, said in a Bloomberg Television interview. ``Higher oil is a hardship for the consumer and it's difficult for companies to pass on costs. The situation isn't easy.''

Crude oil traded above $140 a barrel after rising to a record yesterday on concern that Iran, the second-largest OPEC producer, may face military attacks over its nuclear program and disrupt Middle East supplies.

Slowing Growth

Reports today showed U.K. house prices fell in June by the most since the end of the last recession in 1992, while Japanies business confidence sank to a four-year low, South Korea's inflation rose and Chinese manufacturing growth slowed.

``If you are already invested, you sit tight,'' Howard Wheeldon, senior strategist at BGC Partners LP in London, said in a Bloomberg Television interview. ``Inflation is going to be with us for a long time to come. It's going to be very, very difficult.''

Volkswagen lost 0.8 percent to 181.80 euros, and Ryanair fell 1.4 percent to 2.76 euros.

Crude oil for August delivery rose as much as 85 cents, or 0.6 percent, to $140.85 a barrel in after-hours trading on the New York Mercantile Exchange.

``With crude prices continuing to tick higher, it's precisely this kind of news that will weigh on sentiment,'' Maninka Miller, a trader at CMC Markets in London, wrote.

SocGen, ING

Societe Generale 1.9 percent to 54.26 euros. ING Groep NV, the largest Dutch financial services company, slipped 1.8 percent to 19.88 euros.

Lehman Brothers Holdings Inc. led U.S. financial shares lower yesterday on speculation the fourth-biggest U.S. securities firm may be sold for less than its market price, traders said. Andrew Gowers, a Lehman Brothers spokesman, said the company's policy is not to comment on rumors.

JPMorgan Chase & Co. said prices for some mortgage securities may sink further.

``This is the worst period of my adult lifetime,'' Broad said, speaking about the U.S. economy. ``I do not think things are going to get any better'' before the next president takes office in January.

The banking industry may need additional capital to protect against bad loans, Broad said.

UBS fell 2.2 percent to 20.96 francs. Switzerland's biggest bank said it's calling an extraordinary shareholders' meeting for October to elect new members to the board of directors as it overhauls corporate governance after record losses.

Sumitomo Mitsui

Sumitomo Mitsui, Japan's second-largest bank by market value, dropped 2.1 percent to 782,000 yen. Mizuho Financial Group Inc., the third-biggest, lost 2.2 percent to 485,000 yen.

Large companies said profits will drop 7 percent in the year ending March 31, compared with a 0.3 percent increase predicted three months ago, according to the Bank of Japan's Tankan survey.

Technip SA rose 1.7 percent to 59.78 euros. Europe's second-largest oilfield-services provider had its recommendation lifted to ``overweight'' from ``underweight'' at JPMorgan and to ``neutral'' from ``sell'' at UBS AG.

``Despite the high cost of capacity additions, this investment will add value,'' UBS analysts wrote in a note about European oil services companies.

-- With reporting by Francois Doux and Mark Barton in London. Editor: Stephen Kirkland, Daniel Hauck.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
Last Updated: July 1, 2008 03:19 EDT