European Stocks Fall, Led by Home Retail; U.S. Futures Decline

By Sarah Jones

Sept. 11 (Bloomberg) -- European stocks fell for a third day as concern deepened the economic slowdown will hurt earnings for retailers and financial firms, overshadowing a rebound in oil and mining shares. U.S. index futures and Asian shares also declined.

Home Retail Group Plc sank after Britain's second-largest home-improvement chain reported lower sales. Allied Irish Banks Plc and Bank of Ireland Plc retreated after Dresdner Kleinwort recommended selling the shares. BHP Billiton Ltd., the world's biggest mining company, and BP Plc, Europe's second-largest energy producer, followed metal and oil higher.

Europe's Dow Jones Stoxx 600 Index slipped 0.3 percent to 276.59 as of 8:37 in London. Futures on the Standard & Poor's 500 Index fell 0.4 percent, and the MSCI Asia Pacific Index decreased 0.5 percent.

National benchmark indexes dropped in 13 of the 17 western European markets that were open. Germany's DAX declined 0.7 percent, and the U.K.'s FTSE 100 lost 0.6 percent as did France's CAC 40.

Stocks retreated yesterday after the European Commission cut its forecast for the region's economic growth and concern deepened bank losses will increase. More than $15 trillion has been erased from global equities in 2008 as accelerating inflation and $512 billion in bank writedowns and losses threaten economic growth.

Home Retail

Home Retail sank 5 percent to 229.75 pence. The owner of Britain's second-largest home-improvement chain reported lower same-store sales at its Homebase and Argos stores as a housing slump worsened and consumer confidence slid to a four-year low.

Revenue at Argos stores open at least a year declined 5.8 percent in the second quarter. At the Homebase chain, sales in the 13-week period fell 8.3 percent on that basis.

Allied Irish dropped 1.2 percent to 8 euros after Dresdner cut its recommendation for the nation's largest lender by market value to ``sell'' from ``hold.'' Analysts also downgraded Dublin-based Bank of Ireland to ``sell'' from ``reduce.'' The stock sank 3.1 percent to 5.35 euros.

``We forecast a dramatic rise in bad debts across the Irish banks for 2009 and 2010,'' Dresdner analysts wrote in a note to investors. ``Allied and BoI now look short on capital for 2009.''

Dresdner reduced its earnings per share estimate for Irish lenders next year by an average 33 percent.

BHP rallied 2.4 percent to 1,418 pence. Rio Tinto Group, the world's third-biggest mining company, added 2.3 percent to 4,248 pence.

Copper, lead and tin advanced in London.

BP, BG Group

BP climbed 1.5 percent to 509.75 pence. Total SA, Europe's third-largest oil company, increased 1.9 percent to 45.14 euros.

Crude oil rose from a five-month low in New York as Hurricane Ike gained strength while entering the Gulf of Mexico, shutting fields and raising concern that refinery production may be disrupted.

BG Group Plc climbed 3.8 percent to 1,095 pence. BG, together with partners Petroleo Brasileiro SA and Portugal's Galp Energia SGPS SA, said they found ``another first-class'' oil field in the Santos Basin.

The Iara oil field holds an estimated 3 billion to 4 billion barrels of recoverable light crude oil.

Bayerische Motoren Werke AG declined 1 percent to 28.70 euros. The carmaker is preparing to set aside higher risk provisions as the problems of its leasing business are increasing, Handelsblatt reported on its Web site.

``We can't exclude that we'll have to raise risk provisions in the second half again,'' the newspaper cited Chief Financial Officer Michael Ganal as saying.

BMW more than doubled risk provisions to account for bad debt and lower resale values of leased vehicles in the second quarter.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.