Stocks in Europe, Asia Slide; U.S. Futures Are Little Changed

By Adria Cimino

July 25 (Bloomberg) -- Stocks fell in Europe and Asia on concern losses in financial services may worsen and slowing economies will stifle profit growth. U.S. index futures were little changed.

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 and American International Group Inc. also declined in Europe. National Australia Bank Ltd. tumbled the most since the October 1987 stock market crash after setting aside more money for credit-market losses. UBS AG slipped after New York sued the bank on allegations its promotion of auction-rate securities was fraudulent.

The MSCI World Index lost 0.5 percent to 1,357.13 at 12:40 p.m. in London, dragging the measure down 0.4 percent this week. Futures on the Standard & Poor's 500 Index added less than 0.1 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.

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 experienced bear market plunges of at least 20 percent this year.

Europe, Asia

Europe's Dow Jones Stoxx 600 Index declined 0.9 percent as Lagardere SA, Rentokil Initial Plc and PageJaunes SA slid. The MSCI Asia Pacific Index lost 2.4 percent, the most in six weeks.

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.

Profit at S&P 500 companies fell 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.

Munich Re sank 11 percent to 103.50 euros. The company cut its forecast for earnings this year after second-quarter profit declined 48 percent.

Hannover Re, AIG

Hannover Re, Germany's second-biggest reinsurer, plunged 10 percent to 28.97 euros. The company said it has become more difficult to reach its full-year targets because of capital- market turbulence.

Storebrand ASA, Norway's largest publicly traded insurer, sank 11 percent to 34.55 kroner.

AIG, the world's largest insurer by assets which has units that originate, insure and invest in home loans, lost 34 cents to $27.08 in Germany.

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.

Stocks fell in the U.S. yesterday, sending financial shares to their worst drop in eight years, after home sales slid more than forecast and investor Bill Gross predicted the housing slump will cost banks and brokerages $1 trillion.

National Australia slumped 13 percent to A$26.56. The country's biggest bank set aside A$830 million ($795 million) for credit-market losses. National Australia took a A$181 million provision in March.

UBS, Saint-Gobain

UBS tumbled 7.8 percent to 21.2 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.

Saint-Gobain, Europe's biggest supplier of building materials, added 3.5 percent to 37.96 euros after cutting its 2008 forecast and announcing 4,000 job cuts because of the construction slowdown.

Lagardere declined 0.7 percent to 35.42 euros. France's largest publisher said first-half revenue fell 3.8 percent to 3.8 billion euros on an advertising slowdown in the U.S. and the sale of retail and newspaper units.

Rentokil

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

PagesJaunes slumped 7.4 percent to 8.60 euros. The French yellow-pages company bought by Kohlberg Kravis Roberts & Co. said first-half profit dropped 14 percent to 103.2 million euros after a gain a year earlier from an asset disposal and cut its full-year sales outlook.

Groupe Danone SA gained 4.2 percent to 46.75 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 22 percent to 10.56 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.

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