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

By Adam Haigh

Aug. 26 (Bloomberg) -- Stocks fell in Europe and Asia on concern the economic slowdown and credit-market losses will stifle profit growth. U.S. index futures declined.

L'Oreal SA, the world's largest cosmetics maker, dropped 1.6 percent and UBS AG sank 1.8 percent as business confidence in Germany, Europe's biggest economy, slumped more than forecast to a three-year low this month. Suncorp-Metway Ltd. fell 3.4 percent as Australia's third-largest general insurer said bad debts may rise. CRH Plc, the building-materials maker, declined 3.8 percent after a weaker dollar and deteriorating markets in North America and Europe hurt earnings.

The MSCI World Index lost 0.9 percent to 1,311.97 at 9:18 a.m. in London as all 10 industry groups decreased. The index has dropped 17 percent this year as credit-related losses surpassed $500 billion and inflation accelerated, threatening economic and profit growth.

``We are avoiding the broad consumer-discretionary space'' as the economy stalls, said Andy Lynch, who manages about $3 billion at Schroder Investment Management Ltd. in London. ``As people become more prudent, consumer discretionary stocks are going to suffer.''

Europe's Dow Jones Stoxx 600 Index declined 1.2 percent, while the MSCI Asia Pacific Index decreased 1.1 percent. Futures on the Standard & Poor's 500 Index fell 0.2 percent.

Consumer Sentiment

The Ifo institute's business climate index declined to 94.8 from 97.5 in July. Economists had predicted a drop to 97.2.

German consumer confidence sank to the lowest in more than five years as soaring energy prices sapped purchasing power and the economic outlook deteriorated, another report showed today.

The U.K. economy is likely to enter a ``mild recession'' this quarter, Societe Generale SA wrote in a note to clients. The French brokerage cut its 2009 growth forecast to 0.5 percent from 1.2 percent.

L'Oreal, the world's biggest cosmetics maker, slid 1.6 percent to 67.73 euros.

UBS, the European bank hardest hit by the subprime contagion, lost 1.8 percent to 22.38 Swiss francs. Societe Generale of France slipped 1.3 percent to 61.85 euros.

BankUnited Financial Corp., Florida's largest bank, may lose its ``well-capitalized'' status under federal rules for financial strength unless it attracts at least $400 million of new capital, the company said late yesterday.

Financial shares dragged the Standard & Poor's 500 Index to its largest loss in a month yesterday after Columbian Bank & Trust Co. became the nation's ninth bank to collapse this year.

Earnings Outlook

Profit for companies in Europe's Stoxx 600 will fall 2 percent in 2008, according to analysts' estimates compiled by Bloomberg. That's down from growth of 11 percent forecast at the start of the year. Analysts predict earnings for S&P 500 companies to slip 1.2 percent this year.

Suncorp-Metway slumped 44 cents to A$12.36 after saying net income tumbled 68 percent in the six months ended June 30 as storms increased and falling financial markets cut investment income. Chief Executive Officer John Mulcahy forecast flat profit growth for its managed funds unit in 2009, and said bad debts may increase as the economy loses momentum.

Sumitomo Realty & Development Co., Japan's No. 3 developer, lost 1.1 percent to 2,245 yen after Sebon Corp., a smaller rival, filed for bankruptcy.

CRH declined 3.8 percent to 16.08 euros. First-half profit fell 8.5 percent and forecast a decline in full-year pretax profit similar to the 10 percent drop recorded in the first half.

United Utilities Group Plc, the U.K.'s largest publicly traded water company, dropped 1.1 percent to 723 pence. Lehman Brothers Holdings Inc. cut the shares to ``underweight'' from ``equal weight,'' saying there is a ``diminished likelihood'' of takeovers in the industry.

SSAB, Oerlikon

SSAB Svenskt Staal AB rose 1 percent to 152 kronor. Goldman Sachs Group Inc. lifted its recommendation on the world's largest supplier of high-tensile steel to ``buy'' from ``neutral.''

``SSAB's main end product, heavy plate, has been the strongest steel grade globally in terms of pricing,'' London- based analyst including Peter Mallin-Jones wrote in a note to clients.

OC Oerlikon Corp. slipped 1.1 percent to 260.25 francs. The world's biggest maker of spinning machines reported a first-half loss as rising costs and tighter credit clipped Chinese investment in textile equipment.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net