Stocks in Europe, Asia Decline; U.S. Index Futures Retreat

By Sarah Thompson

Aug. 21 (Bloomberg) -- Stocks in Europe and Asia fell as concern deepened banks will report more writedowns, while Holcim Ltd.'s profit forecast pushed building-materials shares lower. U.S. index futures declined.

HSBC Holdings Plc and BNP Paribas SA both lost 2.6 percent in Europe after Citigroup Inc. analysts predicted three U.S. banks will write down a combined $6.4 billion this quarter. Babcock & Brown Ltd., Asia's worst-performing stock this year, plunged a record 36 percent after earnings dropped and its chief executive officer quit. Holcim sank 1.9 percent as the world's second-biggest cement maker said profit won't meet its target.

Europe's Dow Jones Stoxx 600 Index lost 0.9 percent to 278.21 at 1:54 p.m. in London, extending this year's decline to 24 percent. Financial firms have led stocks lower worldwide in 2008 on concern accelerating inflation and more than $500 billion in credit-related losses will stifle profit growth.

``There is little that can comfort you that we are at the bottom'' for financial shares, said Gary Dugan, London-based chief investment officer for Europe at Merrill Lynch Global Wealth Management. ``We are not going to see the bottom for at least another six months. In terms of this drip feed of bad news, this will continue with banks.'' He spoke in a Bloomberg Television interview. Merrill manages $1.5 trillion worldwide.

Futures on the Standard & Poor's 500 Index decreased 0.7 percent, while the MSCI Asia Pacific Index slipped 0.5 percent.

Abandoned Talks

Lehman Brothers Holdings Inc. fell in German trading after the Financial Times said Korea Development Bank and China's Citic Securities Co. abandoned talks to buy a stake in the U.S. bank this month. Air France-KLM Group slipped as crude rose for a third day, climbing above $118 a barrel.

European Central Bank Governing Council member Nout Wellink said higher prices are feeding into wages, Het Financieele Dagblad reported, citing an interview.

``There are still effects in the pipeline that push up prices and we see second-round effects appear,'' Wellink, who also heads the Dutch central bank, told the newspaper Het. ``The higher prices feed into wages. We are monitoring all developments.''

Rising commodity prices have kept central banks from cutting interest rates even as the economy slows.

Crude rose for a third day in New York on concerns that Russian and Caspian Sea supplies may be disrupted after the U.S. agreed yesterday to construct a missile-defense system in Poland over Russian objections.

HBOS, Credit Suisse

HSBC, Europe's largest bank, slipped 2.6 percent to 802.5 pence. BNP Pariba, France's biggest bank, sank 2.6 percent to 56.86 euros.

Citigroup analyst Prashant Bhatia cut his third-quarter earnings estimates for Lehman, Goldman Sachs Group Inc. and Morgan Stanley, and estimated the three banks will write down a combined $6.4 billion for the period.

Goldman slipped $1.20 to $157.05 in Germany, while Morgan Stanley didn't trade in Europe.

Lehman lost 48 cents to $13.25 in Germany. The two Asian investors held talks in the first week of this month about buying a stake of as much as 50 percent in the New York-based firm, the Financial Times reported today, citing unidentified people familiar with the matter. The pair walked away after deciding Lehman was asking too high a price, the newspaper said.

Matthew Russell, a spokesman for Lehman in Hong Kong, declined to comment on the report, as did Sung Joo Yung, a spokesman at Seoul-based Korea Development Bank. Raymond Tang, a spokesman for Citic in Beijing, said he hadn't heard about the discussions.

Five-Week High

The cost of protecting bank debt from default rose to a five-week high in Europe.

Credit-default swaps on the Markit iTraxx Financial index of 25 European banks and insurers jumped 2.5 basis points to 90, the highest since July 16, according to JPMorgan Chase & Co. prices at 10 a.m. in London.

Babcock & Brown, a Sydney-based manager of infrastructure assets, slumped A$1.23 to A$2.22. The company posted a 24 percent decline in net income and said Phil Green will resign as CEO. Jim Babcock, who founded the company in 1977, stepped down as executive chairman.

Holcim declined 1.9 percent to 75.6 francs. Second-quarter profit dropped after U.S. construction slowed and transport and raw-material costs increased.

Missing Target

Operating profit for 2008 will match last year's results on a comparable basis, the Zurich-based company said today in a statement. That compares with a long-term target of 5 percent annual growth.

Net income fell to 696 million Swiss francs ($634 million) in the quarter from 2.07 billion francs a year earlier, when the Zurich, Switzerland-based company booked a 1.1 billion-franc disposal gain. Earnings before interest and tax decreased to 1.23 billion francs. Analysts estimated 1.31 billion francs.

Cie. de Saint-Gobain SA, Europe's biggest supplier of building materials, fell 1.8 percent to 39.45 euros. Lafarge SA, the world's No. 1 cement company, sank 3 percent to 77.97 euros.

Air France, Europe's biggest airline, sank 1.2 percent to 16.03 euros. Ryanair Holdings Plc, the region's largest discount carrier, slipped 2.2 percent to 2.56 euros. BMW, the world's largest luxury-car maker, lost 2.7 percent to 28.91 euros.

Crude oil for October delivery rose as much as $2.93, or 2.5 percent, to $118.49 a barrel on the New York Mercantile Exchange.

Frontline fell 5.6 percent to 296 kroner. The world's largest owner of supertankers said second-quarter net income rose to $318.4 million, or $4.25 a share, from $187.9 million, or $2.51, a year earlier. The shipping line was expected to make $339 million, or $4.53, according to the median estimate of nine analysts surveyed by Bloomberg News.

Eurasian Natural Resources Corp. advanced 3.2 percent to 1,060 pence. The world's third-biggest ferrochrome producer said first-half profit more than tripled after prices for the steelmaking raw material increased to a record.

To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net