European Stock-Index Futures Decline; Allianz May Retreat

By Sarah Thompson

Aug. 7 (Bloomberg) -- European stock-index futures fell, following declines in Asia, after Allianz SE scrapped its profit growth forecast and American International Group Inc.'s earnings missed analysts' estimates.

Allianz, Europe's biggest insurer, may retreat after saying second-quarter profit tumbled 29 percent. AIG, the world's largest insurer, posted a $5.36 billion loss. Liberty International Plc might decline after Deutsche Bank AG recommended selling shares of the U.K.'s largest shopping-centre owner. Deutsche Telekom AG may be active after Europe's biggest telephone company posted a 35 percent drop in second-quarter earnings.

Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, slipped 16, or 0.5 percent, to 3,409 at 7:35 a.m. in London. The U.K.'s FTSE 100 Index might fall 10, according to CMC Markets.

European stocks rose yesterday for a second day after BNP Paribas SA's earnings eased concern the bank will have to raise capital and Xstrata Plc's hostile bid for Lonmin Plc lifted mining shares. Asian stocks fell today on lower earnings from banks, airlines and shipping companies.

``AIG's massive losses has shattered the market's confidence,'' said Oliver Stevens, head of dealing at IG Markets in Melbourne. ``Asia turns negative after a positive open, which means no support for Europe.''

Investors will also be watching interest-rate decisions today from the Bank of England and the European Central Bank. Economists predict both banks will keep rates unchanged. The Bank of England announces its decision at noon in London, while the Frankfurt-based ECB, which increased borrowing costs last month, publishes at 1:45 p.m. local time.

Credit Losses

The Stoxx 600 has lost 21 percent this year as record oil, accelerating inflation credit losses nearing $500 billion worldwide slow economic growth, prompting analysts to cut earnings estimates.

Profits at Stoxx 600 companies may drop 2.5 percent on average in 2008, according to projections tracked by Bloomberg. That's down from a forecast for 11 percent growth in January.

All 23 countries in the MSCI World except Canada have entered bear markets since September. A bear market is commonly defined as a drop of 20 percent from a peak.

Allianz may slide. Europe's biggest insurer abandoned its earnings growth forecast after losses at Dresdner Bank led to a 29 percent drop in second-quarter profit.

Allianz expects markets to remain difficult through 2009 and its target for 10 percent compound annual growth in operaing earnings ``cannot be maintained,'' the Munich-based insurer said in a statement yesterday.

AIG, Liberty

AIG, the world's biggest insurer, reported a worse-than- estimated loss after housing-related writedowns wiped out profit for a third straight quarter, renewing concern that the company may need more capital.

Liberty might decline after the U.K.'s largest shopping- centre owner was downgraded to ``sell'' from ``hold'' at Deutsche Bank AG because of second-quarter write-offs and economic deceleration.

Deutsche Telekom reported profit fell on German client losses, the strong euro and higher interest costs. Net income declined to 394 million euros ($608.2 million) in the second quarter, compared with the 748 million-euro median estimate of 12 analysts polled by Bloomberg via phone and e-mail. Sales slipped 2.9 percent to 15.13 billion euros, meeting a 15.1 billion-euro median estimate.

Barclays Plc, the U.K.'s third-biggest bank, said first- half profit fell 34 percent as securities trading declined and credit writedowns increased. Net income was 1.72 billion pounds ($3.4 billion), more than the 1.5 billion-pound average estimate of 11 analysts surveyed by Bloomberg. Impairment charges and other credit provisions were 2.45 billion pounds.

Impairments, Writedowns

``The impairment charge looks to be a little higher then expected,'' said Manus Cranny, an analyst at Cantor Index in London.

The Barclays Capital investment bank had pretax profit of 524 million pounds. The unit had 2.8 billion pounds of additional net writedowns in the first half after taking losses of 2.3 billion pounds on securities backed by U.S. subprime mortgages in 2007.

Dexia SA, the world's largest lender to local governments, plans to add $300 million to its U.S. bond insurance unit and stop selling coverage for asset-backed debt after the division posted a second-quarter loss. The capital will allow the unit, Financial Security Assurance Inc., to exceed requirements for a AAA credit rating, New York-based FSA said.

Dexia said its second-quarter net income fell 32 percent to million euros when losses at FSA are included.

Nestle, Axa

Nestle SA, the world's largest food company, said first-half profit rose at the slowest pace in four years on higher cocoa and coffee prices and a weaker dollar. Net income climbed 6.1 percent to 5.21 billion Swiss francs ($4.92 billion). That beat the 5.01 billion-franc median estimate of 10 analysts in a Bloomberg survey. Sales rose 3.8 percent to 53.07 billion francs.

Axa SA, Europe's second-biggest insurer, said first-half profit declined 32 percent to 2.16 billion euros after falling stock markets curbed sales of savings plans and on writedowns of investments. Analysts projected earnings at 1.93 billion euros in a Bloomberg survey.

Hammerson Plc will probably drop. The U.K. owner of Birmingham's Bullring and London's Brent Cross shopping centers posted a loss in the first half as the value of its offices and malls declined.

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