Stocks in Europe, Asia Drop, Led by Banks; U.S. Futures Fall

By Adria Cimino

Aug. 13 (Bloomberg) -- Stocks in Europe and Asia declined for a second day as concern deepened that banks will report more losses and the economic slowdown will drag down earnings. U.S. index futures dropped after Deere & Co.'s profit trailed analysts' estimates.

Hypo Real Estate Holding AG, Germany's second-biggest commercial-property lender, fell 4.1 percent after profit tumbled 95 percent on writedowns. UBS AG, under investigation in a U.S. probe of tax evasion, slid 5.6 percent after saying it examined complaints by former banker Bradley Birkenfeld about working practices at the bank's cross-border business in 2006. Mitsui Fudosan Co. dropped 3.5 percent, leading developers lower in Tokyo as Japan's economy contracted. Deere, the largest maker of farm equipment, declined 8.4 percent.

The MSCI World Index lost 0.8 percent to 1,345.64 at 1:25 p.m. in London as nine of the 10 industry groups fell. Japan's Nikkei 225 Stock Average tumbled 2.1 percent after the nation's economy shrank for the first time in a year.

Banks ``still have a way to go with writedowns,'' Philippe Gijsels, Brussels-based senior equity strategist at Fortis Global Markets with $62 billion under management, said in a Bloomberg Television interview. ``The economic slowdown worldwide will impact banks' earnings.''

Europe's Dow Jones Stoxx 600 Index slid 1.7 percent. DSG International Plc fell the most in seven months in London as JPMorgan Chase & Co. recommended selling the retailer's shares, while OC Oerlikon Corp. dropped after cutting its forecast.

The MSCI Asia Pacific Index decreased 1.3 percent, Telstra Corp., Australia's biggest phone company, sinking the most since March as earnings missed estimates. Futures on the Standard & Poor's 500 Index fell 0.24 percent.

Cutting Forecast

A report today showed U.K. unemployment rose the most in almost 16 years in July as the deepening slowdown pushed companies to cut jobs. The Bank of England lowered its growth forecast for the economy to about 0.1 percent on a year-on-year basis in the first quarter of 2009, down from 1 percent earlier.

``Worries linked to the credit crisis are justified,'' said Oumkaltoum El Ouarti, a fund manager at Richelieu Finance in Paris, which oversees $6.2 billion. ``Provisions may increase in the second half.''

U.S. stocks pulled ahead of Brazil, Russia, India and China this week for the first time in 2008, spurred by the Federal Reserve's efforts to cut borrowing costs even as the biggest developing countries are raising theirs, Bloomberg data show.

Less Pessimistic

The S&P 500's 12 percent decline this year is the second- best performance among benchmark indexes in the world's 20 biggest equity markets, according to Bloomberg data. The gauge has rallied 6.2 percent from an almost three-year low last month as crude prices sank 23 percent from a record.

Stock investors from Mexico City to Madrid are growing less pessimistic, a survey of Bloomberg users showed.

While most investors expect benchmark indexes to decline, fewer predict losses than in July for the S&P 500, the FTSE 100 Index, France's CAC 40 Index, Italy's S&P/MIB Index, the Swiss Market Index, Germany's DAX Index, Spain's IBEX 35 Index and Mexico's Bolsa, according to the Bloomberg Professional Global Confidence Survey. The survey was conducted last week among 2,229 users.

Russia's RTS stock index is the world's worst performer this quarter among the 20 largest markets as lower oil, the war in Georgia and the probe of steel company OAO Mechel raised concern that investing in the former Communist nation can be perilous. Stocks rallied yesterday after President Dmitry Medvedev halted the invasion of Georgia.

$202 Million Loss

Hypo Real Estate fell 4.1 percent to 17.89 euros. The lender said second-quarter pretax profit plunged 95 percent because of writedowns on debt-related investments.

The company said market conditions are ``still uncertain.'' It reported an investment loss of 135 million euros ($202 million) in the quarter, higher than the 46 million euros in a Bloomberg survey of analysts.

UBS, the European bank hardest hit by the subprime contagion, slid 5.6 percent to 21.36 francs.

Chairman Peter Kurer, who was general counsel of the world's largest wealth manager at the time, in a May 2006 letter to Birkenfeld confirmed that an internal investigation of his complaints had been completed, UBS spokesman Serge Steiner said in a telephone interview today. Birkenfeld in June pleaded guilty to helping a billionaire UBS customer evade U.S. taxes.

UBS is being investigated in the U.S. over whether it helped clients dodge American taxes.

$12 Trillion Erased

More than $12 trillion has been erased from global equity markets this year as credit-related losses topping $500 billion and accelerating inflation threaten economic and profit growth.

``As long as the financial crisis is omnipresent, the market will remain fragile,'' said Catherine Huguel, who oversees $239 million as managing director of Hugau Gestion in Paris. ``The crisis is far from over.''

Writedowns and losses have made banks the worst performers worldwide this year and led analysts to cut profit estimates.

Earnings for financial firms in the Stoxx 600 will drop 25 percent this year, more than 10-fold the projected declined for all companies in the measure, according to analysts' estimates compiled by Bloomberg. Analysts predicted profit for the group to fall 3.9 percent at the start of the year.

Europe's Stoxx 600 Banks Index has lost 29 percent this year, the biggest drop among the 18 groups in the broader index.

Mitsui Fudosan, Japan's No. 1 developer, fell 3.5 percent to 2,315 yen. Japan's economy contracted 0.6 percent last quarter, the government said today, bringing the country to the brink of its first recession in six years, as exports fell and consumers spent less. The GDP report also showed housing investment dropped 3.4 percent last quarter, compared with expectations for an increase.

Telstra, Deere

Telstra lost 4 percent to A$4.32. Profit rose 13 percent in the six months ended June 30 to A$1.77 billion ($1.5 billion), less than the median estimate in a Bloomberg survey. Its forecast for an 8 percent increase in earnings before interest and taxes this year trailed estimates compiled by Bloomberg.

Deere retreated $5.86 to $63.49 in early New York trading. Third-quarter profit was $1.32 a share, missing the $1.37 average of 17 analyst estimates compiled by Bloomberg.

DSG, the largest consumer-electronics retailer, tumbled 13 percent to 53.5 pence, after subtracting for the effect of its dividend payout.

The ability for the company to improve its finances with asset sales is ``misplaced'' and the economic environment in all of the company's main markets continues to deteriorate, JPMorgan said today, downgrading the stock to ``underweight'' from ``neutral.''

Oerlikon fell 7.2 percent to 258.5 francs after the world's biggest maker of spinning machines for textiles cut its profit forecast for 2008. Oerlikon predicted a 33 percent drop in operating profit, and will book 350 million Swiss francs ($322 million) in writedowns from three units.

Tandberg ASA jumped 18 percent to 115.25 kroner. The Norwegian maker of video-conferencing equipment said it received an approach from a private-equity company and started ``preliminary discussions'' about a possible bid.

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