European Stocks, U.S. Futures Rise; Royal Bank, Ryanair Advance

By Adria Cimino

Aug. 8 (Bloomberg) -- European stocks rise, extending this week's gains, after better-than-estimated earnings from Royal Bank of Scotland Group Plc bolstered confidence in banks and a drop in oil sent airlines and retailers higher. U.S. futures gained, while Asian shares declined.

Royal Bank of Scotland, the U.K.'s second-biggest bank, jumped to a seven-week high. Ryanair Holdings Plc, Europe's largest discount airline, and Marks & Spencer Plc gained after oil dropped more than $1 a barrel.

Europe's Dow Jones Stoxx 600 Index added 0.4 percent to 287.88 at 8:44 a.m. in London, extending this week's gain to 2.7 percent. Stocks are headed for the best week in a month as Royal Bank joined BNP Paribas SA and Societe Generale SA in posting earnings that topped analysts' estimates.

The Stoxx 600 has dropped 21 percent this year and analysts have lowered profit estimates as credit losses nearing $500 billion worldwide threaten economic growth and accelerating inflation keeps central banks from lowering borrowing costs.

Earnings for companies in the Stoxx 600 will drop 2.5 percent this year, according to data compiled by Bloomberg. That compares with expectations for a 2 percent decrease a month ago.

Ryanair added 1.6 percent to 258.75 euros. Air France-KLM Group, Europe's biggest airline, advanced 1.4 percent to 17.69 euros.

Marks & Spencer, the U.K.'s largest clothing retailer, rose 1 percent to 285.75.

Oil headed for its fourth decline in five weeks as demand fell and the dollar gained, reducing the appeal of commodities as an inflation hedge.

Crude for September delivery fell as much as $1.09, or 0.9 percent, to $118.93 a barrel on the New York Mercantile Exchange, and last traded down 89 cents at $119.13. Price have fallen 4.8 percent this week.

BHP, Michelin

BHP Billiton Ltd. slipped 1.4 percent to 1,529 pence. Rio Tinto Group, the world's third-largest mining company, declined 1.1 percent to 4,756 pence. Copper, lead and nickel declined in London.

Michelin & Cie., the world's second-biggest tiremaker, dropped 1.5 percent to 43.14 euros. Pirelli & C. SpA, Europe's third-largest tiremaker, slipped 1.7 percent to 43 cents.

Bridgestone Corp., the world's largest tiremaker, cut its full-year profit forecast 50 percent on weaker sales in the U.S. and surging raw-material prices.

Vodafone Group Plc, the world's largest mobile-phone company, slid 2.9 percent to 135.25 pence. Goldman Sachs Group Inc. cut its recommendation to ``neutral'' from ``buy'' and removed the shares from its ``conviction buy'' list.

The company's fiscal first-quarter earnings ``showed weaker revenue growth in Europe than we had expected and in particular heightened risk in Spain,'' the analysts wrote.

Barclays Plc, the U.K.'s third-biggest bank, slipped 1.7 percent to 368.5 pence after Merrill Lynch & Co. cut its price estimate on the stock 3.4 percent to 259 pence on concern writedowns will increase if credit markets don't improve.

UBS AG slipped 2.5 percent to 21.2 francs. Switzerland's biggest bank may pay more than Citigroup Inc. or Merrill Lynch & Co. to settle state and federal claims that it fraudulently sold auction-rate securities, a person briefed on the negotiations said.

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