Stocks Fall in Europe, Asia; U.K.'s FTSE 100 Enters Bear Market

By Sarah Jones

July 3 (Bloomberg) -- Stocks dropped in Europe and Asia as oil topped $144 a barrel, damping earnings prospects for carmakers and airlines and stoking concern the global economy will slow further. The U.K.'s FTSE 100 Index fell into a bear market, and U.S. index futures advanced.

Daimler AG, Toyota Motor Corp. and Air France-KLM Group declined after oil rose to a record. ArcelorMittal and BHP Billiton Ltd. led commodity producers lower. Nvidia Corp., a maker of computer-graphics chips, tumbled 23 percent in Germany after cutting its sales forecast.

The MSCI World Index lost 0.4 percent to 1,369.82 at 9:15 a.m. in London as nine of the 10 industry groups fell. The index has fallen 18.6 percent from a record in October. U.S. stocks sank yesterday, sending the Dow Jones Industrial Average into a bear market.

``I'm concerned about the prospects for an economic slowdown'' and the negative impact on earnings, said Mark Bon, a London-based fund manager at Canada Life, which oversees about $15 billion. ``Sentiment is so poor. There does not appear to be any obvious catalyst to change that.''

Futures on the Standard & Poor's 500 Index added 0.2 percent as did futures on the Dow average. Europe's Dow Jones Stoxx 600 Index declined 1 percent, while the MSCI Asia Pacific Index slipped 0.9 percent.

The U.K.'s FTSE 100 dropped as low as 5358.50, extending its decline from last year's high to 20.4 percent after credit losses and the worst housing slump in 30 years dimmed the earnings outlook for banks and retailers.

Stocks fell in Japan for the 11th straight day, the longest losing streak in 54 years.

$11 Trillion Lost

Financial stocks have led declines that erased almost $11 trillion from equity markets worldwide this year. Credit-related losses topping $400 billion, record oil prices and accelerating inflation have stoked concern policy makers will have to raise borrowing costs as the global economy slows.

European Central Bank President Jean-Claude Trichet is poised to increase interest rates today to stem, according to a survey of economists. Central banks in Sweden and Indonesia lifted rates today.

Daimler, the world's second-largest maker of luxury cars, fell 1.8 percent to 37.50 euros. Toyota, which gets about half of its profit from North America, lost 0.8 percent to 4,900 yen. Hyundai Motor Co., South Korea's largest automaker, declined 2.3 percent to 71,800 won.

Crude oil for August delivery climbed as much as 0.7 percent to $144.57 today in New York after U.S. stockpiles dropped unexpectedly and Russian President Dmitry Medvedev said prices will climb to $150.

Air France, Europe's biggest airline, dropped 3 percent to 14.29 euros.

Air France Downgrade

Deutsche Bank AG downgraded Air France to ``sell'' from ``hold,'' saying it expects further consensus downgrades to earnings forecasts.

``Premium growth could turn negative forcing caution on the revenue outlook,'' London-based analyst Chris Reid wrote in a note to clients dated yesterday.

ArcelorMittal, the world's largest steelmaker, dropped 4.7 percent to 53.30 euros. BHP Billiton, the world's biggest mining company, lost 3.4 percent to 1,700 pence.

``Commodity stocks have done very well and people are nervous they may have seen their best,'' said Bon at Canada Life.

Nvidia, the second-biggest maker of computer-graphics chips, sank $4.18 to $13.85 in Germany after cutting its second- quarter sales forecast because of a drop in demand and increased competition.

UBS

UBS AG fell 2.6 percent to 20.08 pence. Citigroup Inc. said the bank may post additional writedowns and raise more capital, a day after Chairman Peter Kurer told a newspaper UBS won't need more funds.

The Swiss bank, which wrote down $38 billion over the past three quarters, still carries $83 billion of ``risk exposures that are likely to require further markdowns,'' London-based Citigroup analyst Jeremy Sigee said in a note today.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.