European Stocks Fall on Economic Concern; Asian Shares Decline

By Adam Haigh

Sept. 4 (Bloomberg) -- European stocks fell on concern slowing economic growth will curb earnings at consumer companies and as Citigroup Inc. said there's ``plenty more pain ahead'' for Spanish banks. Asian shares and U.S. futures also retreated.

Ryanair Holdings Plc and Carrefour SA led declines among travel and retail companies. Banco Espanol de Credito SA dropped 1.8 percent as Citigroup recommended selling the stock. Unilever rallied 6.3 percent after naming Nestle SA's Paul Polman as chief executive officer. The European Central Bank and the Bank of England will release their decision on interest rates today.

The Dow Jones Stoxx 600 Index lost 0.4 percent to 284.57 at 9:49 a.m. in London. The MSCI Asia Pacific Index decreased 1.2 percent. Futures on the Standard & Poor's 500 Index expiring in September slipped 0.4 percent.

``People are sticking to their guns ahead of the rate decisions,'' said Joshua Raymond, market strategist at City Index Ltd. in London. ``The general sentiment is that we are heading lower for equity markets. Concerns over growth remain in focus.''

The MSCI World Index fell for a fourth straight day in August, bringing the loss this year to 17 percent as the global economy cooled and financial firms posted writedowns and credit- related losses of more than $500 billion.

Both the ECB and the BOE will probably maintain current levels for borrowing costs as inflation concerns make it harder for policy makers to respond to the risk of recession. Reports yesterday showed consumer spending, company investment and exports fell in the second quarter, dragging the European economy into a 0.2 percent contraction.

Rate Estimates

The ECB will leave rates at 4.25 percent when the decision is announced at 1:45 p.m. in Frankfurt, according to all but one of 53 economists in a Bloomberg News survey. The BOE will leave its key rate at 5 percent at 12 p.m. in London today, according to all 61 economists in a Bloomberg News survey.

The Stoxx 600 extended losses after crude oil rebounded, climbing above $110 a barrel in New York.

Mitsui O.S.K. Lines Ltd., Japan's second-largest shipping company, slid 7.3 percent while Newcrest Mining Ltd. lost 6.5 percent, leading a drop in Asia after marine rates slumped on concern demand for raw materials will slow.

Ryanair, Europe's biggest discount airline, sank 2.1 percent to 2.70 euros. Travel and leisure companies were among the biggest decliners in the Stoxx 600, with a measure for the industry dropping 1 percent.

Retailers

TUI AG, owner of the region's largest tourism company, fell 2.8 percent to 13.55 euros. The stock will be replaced by K+S AG in Germany's benchmark DAX Index as of Sept. 22, Deutsche Boerse AG said yesterday after the close of trading.

Carrefour, the world's second-largest retailer, slipped 1.7 percent to 35.78 euros. DSG International Plc, the U.K.'s biggest consumer electronics retailer, dropped 2.6 percent to 55.5 pence.

Banco Espanol de Credito, known as Banesto, lost 1.8 percent to 9.27 euros after Citigroup downgraded the shares to ``sell'' from ``hold.''

``For a number of reasons, we believe that there is plenty more pain ahead,'' London-based analyst Ronit Ghose wrote in a note to clients today. Citigroup slashed its price estimate on the shares by 17 percent to 8.3 euros.

Bankinter SA, the Spanish lender whose biggest shareholder is Credit Agricole SA, fell 1.1 percent to 7.29 euros. Citigroup reduced its share-price projection 16 percent to 4.60 euros.

Bank Losses

Banks have led losses among the 18 industry groups in the Stoxx 600 this year, falling 30 percent as mounting credit- related losses have forced companies from Royal Bank of Scotland to UBS AG to raise capital. Analysts now expect earnings at European banks to shrink 24 percent, compared with forecasts for a 2.1 percent drop at the end of last year, Bloomberg data shows.

Unilever added 6.3 percent to 1,584 pence. The world's second-largest consumer-products maker said it plans to appoint Polman as chief executive officer to succeed Patrick Cescau.

BP Plc advanced 4.4 percent to 528 pence. Europe's second- largest oil producer and its billionaire partners in Russian oil venture TNK-BP signed an accord to resolve a management dispute.

Stan Polovets, who heads up the company that represents the Russian billionaire shareholders, known collectively as AAR, said in a phone interview the partners agreed to settle the disagreement, preserving investors' value in the venture. BP and AAR each own 50 percent of TNK-BP Ltd.

Mitsui O.S.K. declined 7.3 percent to 1,116 yen, the most since Feb. 6, after the Baltic Dry Index, a measure of commodity shipping rates, tumbled 5 percent yesterday on concern China's demand for imports of iron ore will weaken.

UBS AG cut its outlook today for container shipping stocks to ``negative,'' citing ``decelerating demand growth, excessive supply, and aggressive price competition.''

Newcrest Mining, Australia's largest gold mining company, slumped 6.5 percent to A$21.14, the lowest since July 4, 2007.

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