European Stocks Decline, Led by BHP; U.S. Index Futures Retreat

By Adria Cimino

Aug. 12 (Bloomberg) -- European stocks fell for the first time in three days as declines by mining companies outweighed gains by tiremakers and airlines.

U.S. index futures retreated as JPMorgan Chase & Co. warned it will post a $1.5 billion writedown on mortgage assets. Asian shares also dropped, while Russian equities climbed after President Dmitry Medvedev ordered a halt to the military operation in Georgia.

BHP Billiton Ltd., the world's largest mining company, tumbled after gold, platinum and silver retreated deeper into a bear market. Michelin & Cie., the world's second-biggest tiremaker, Royal Ahold NV and Ryanair Holdings Plc rose. Singapore Telecommunications Ltd. sank on worse-than-estimated earnings.

Europe's Dow Jones Stoxx 600 Index lost 0.3 percent to 292.32 at 2:05 p.m. in London. Mining stocks, which led gains worldwide last year, are the worst performers in the past month, following declines in metals prices.

``For the moment, the best performance of basic resources shares is behind us,'' said Emmanuel Soupre, a fund manager at Neuflize OBC Asset Management in Paris, which oversees the equivalent of $33 billion. ``The idea of an economic slowdown is weighing on raw materials prices.''

Futures on the Standard & Poor's 500 Index fell 0.3 percent, while the MSCI Asia Pacific Index lost 0.8 percent. Russia's Micex Index added 2.3 percent.

More than $12 trillion has been erased from global equity markets this year as credit-related losses approach $500 billion and inflation accelerates, threatening economic and profit growth.

Inflation

Reports today provided the latest evidence that inflation is making it harder for policy makers to cut interest rates. Inflation last month held at the fastest pace in at least 12 years in France, while in the U.K. the rate climbed to more than double the central bank's 2 percent target.

House prices in Britain fell as the squeeze on credit brought the property market to a ``virtual standstill.'' U.K. homebuilders Persimmon Plc and Bellway Plc dropped after Dresdner Kleinwort said investors should abandon the stocks.

``We're waiting for more visibility on the evolution of the economy,'' said Clemence Bounaix, an analyst at Richelieu Finance in Paris, which oversees $6.2 billion. ``There are worries about inflation and consumer spending.''

Rising credit losses and higher inflation have prompted analysts to slash profit estimates this year. Earnings will slide 2.5 percent in 2008 for companies in the Stoxx 600, according to analysts' estimates compiled by Bloomberg. That's down from 11 percent growth forecast at the start of the year.

Second-quarter earnings at the 429 companies in the S&P 500 that have released results since July 8 are down 23 percent on average from a year earlier, according to data compiled by Bloomberg. Financial companies suffered the deepest declines, with profits down 91 percent.

Europe, Asia

Europe's Stoxx 600 has rebounded 10 percent from a three- year low on July 15 as oil retreated from a record and companies from Volkswagen AG and Nokia Oyj to Societe Generale SA and Royal Bank of Scotland Group Plc reported earnings that beat analysts' estimates. The gains have trimmed this year's retreat to 20 percent.

BHP dropped 2.8 percent to 1,446 pence as gold, platinum and silver slumped. Anglo American Plc, the world's fourth- biggest diversified mining company, retreated 2.2 percent to 2,619 pence.

Gold, platinum and silver plunged to their lowest in more than seven months on concern a spreading global economic slowdown will reduce demand for raw materials.

Mining Stocks

The Stoxx 600 Basic Resources Index lost 1.7 percent, the most among the 18 industry groups in the pan-European index. The industry has tumbled 11 percent this month as metals prices retreated.

Stocks pared declines as oil retreated after Russia's decision eased concern about regional supply disruptions. The dollar traded near a 5 1/2-month high against the euro also limited the appeal of commodities.

Crude for September delivery slipped as much as $1.97 a barrel, or 1.7 percent, to $112.48 on the New York Mercantile Exchange. Futures last traded up 49 cents. It touched a record $147.27 on July 11.

Michelin added 4.4 percent to 50.08 euros. Daimler AG, the world's largest truckmaker, climbed 3.6 percent to 44.33 euros. Ahold, the owner of the Stop & Shop grocery chain, increased 1.5 percent to 8.82 euros. Ryanair, Europe's biggest discount airline, gained 1.7 percent to 2.97 euros.

JPMorgan

JPMorgan lost 49 cents to $41.40. The bank will write down the value of mortgage-backed assets by at least $1.5 billion this quarter after credit-market turmoil and the U.S. housing slump deepened.

Trading conditions ``have substantially deteriorated'' since July and ``sharply widened'' spreads on mortgage-backed securities and loans caused losses, the second-biggest U.S. bank by market value said.

``From the beginning, we said it was a very significant crisis and would take time to work though the system,'' said Lucy MacDonald, London-based chief investment officer of global equities at RCM Ltd., which has $100 billion under management.

Standard Chartered Plc slipped 4.1 percent to 1,534 pence. Citigroup cut its recommendation on the stock to ``sell'' from ``hold,'' citing rising inflationary pressure in Asia.

``This will act as a cap on the group's rating with earnings potentially disappointing as asset growth slows next year,'' the analysts wrote.

SingTel

SingTel slumped 3.1 percent to S$3.47, set for its biggest decline since June 16. First-quarter profit fell 5.3 percent to S$878.1 million ($622 million) as a stronger currency eroded overseas earnings. Profit, the lowest in two years, missed the S$902 million median of analyst estimates in a Bloomberg survey.

China Mobile fell 3.9 percent to HK$95.10. Citigroup lowered its share-price estimate to HK$120 from HK$150, citing ``regulatory headwinds'' and increased competition.

U.K. homebuilders fell after Dresdner Kleinwort analyst Alistair Stewart said their results could be ``the grimmest for decades'' and investors should abandon the stocks after their recent rally.

Persimmon, the No. 1 by market value, sank 1.1 percent to 406 pence. Bellway, a U.K. homebuilder aimed at first-time buyers, tumbled 3.9 percent to 622.5 pence.

UBS AG rose 2 percent to 23.64 francs. Switzerland's biggest bank plans to separate its investment banking and wealth management units after a fourth straight quarterly loss caused by subprime-related writedowns. The European bank hardest hit by the collapse of the U.S. subprime market reported a second- quarter net loss of 358 million Swiss francs ($329 million), and and said it doesn't expect the ``adverse economic and financial trends'' to improve in the second half.

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