European Stocks Fall on Growth Concern; U.S. Futures Advance

By Sarah Jones

Sept. 10 (Bloomberg) -- European stocks fell for a second day as the European Commission cut its forecast for the region's economic growth and concern deepened bank losses will increase. U.S. index futures advanced, while Asian shares retreated.

BHP Billiton Ltd., the world's largest mining company, sank 2.3 percent and PPR SA, the retailer that owns Gucci, lost 3.1 percent after the commission said the euro-area economy will expand 1.3 percent this year, down from an earlier forecast of 1.7 percent. Credit Agricole SA dropped 3.6 percent and UBS AG declined 2.4 percent. Lehman Brothers Holdings Inc. reported a $3.9 billion loss in the third quarter.

Europe's Dow Jones Stoxx 600 Index slipped 1 percent to 276.84 at 1:38 p.m. in London, extending this year's decline to 24 percent. More than $15 trillion has been erased from global equities in 2008 as accelerating inflation and $507 billion in bank writedowns and losses threaten economic growth.

``The worries are multiple,'' said Sebastien Korchia, a fund manager at Meeschaert Asset Management in Paris, which oversees about $2.8 billion. ``There's the problem of growth coupled with inflation. The market also has other worries about the rest of the banking system.''

Futures on the Standard & Poor's 500 Index rose 0.2 percent. The MSCI Asia Pacific Index lost 0.7 percent, led by materials companies.

RSA Insurance Group Plc slumped 3.8 percent after JPMorgan Chase & Co. recommended selling shares of the U.K's second- largest non-life insurer, saying takeover prospects were limited.

National Markets

National benchmark indexes dropped in all 18 western European markets. Germany's DAX declined 0.8 percent, and the U.K.'s FTSE 100 lost 1.2 percent. CAC 40 sank 0.7 percent.

BHP slipped 2.3 percent to 1,373 pence. Xstrata Plc, the world's fourth-largest copper producer, dropped 5.3 percent to 2,233 pence. PPR retreated 3.1 percent to 73.58.

``Developments in the global economy seem to suggest a significant downward revision for 2009,'' the European Commission said today, referring to forecasts it plans to publish in November.

Separately, the National Institute for Economic and Social Research said the U.K. economy is contracting for the first time in at least a decade.

Credit Agricole, France's third-largest bank, fell 3.6 percent to 14.23 euros. UBS, the European bank hardest hit by subprime-related losses, declined 2.4 percent to 23.66 francs. Barclays Plc lost 2.7 percent to 256 pence.

Lehman Report

Lehman reported a loss and said it plans to sell a majority stake in its investment-management unit as it struggles to survive a crisis of investor confidence. The bank cut its dividend to 5 cents a share from 68 cents.

Lehman shares added 12 percent to $8.75 in pre-market trading in New York, reversing earlier declines.

``In these periods of unprecedented volatility every word by banks or financial institutions is going to be scrutinized,'' said Andy Brough, a fund manager at Schroder Investment Management in London, which has about $12.7 billion.

The fourth-largest U.S. securities firm has been trying to raise capital and shed devalued real-estate assets that saddled the company with $8.2 billion in writedowns and credit losses in the past year.

FedEx climbed 5 percent to $88.96 in German trading after saying first-quarter profit will exceed the company's forecast as fuel spending fell.

Downside Risks

RSA declined 6 percent to 152.6 pence after JPMorgan cut the insurer to ``underweight'' from ``overweight'' as analysts said they see limited prospects for mergers and acquisitions at current levels.

``The risks are now on the downside,'' London-based analyst Andrew Hughes wrote in a note to investors.

Royal Bank of Scotland Group Plc lowered its recommendation for the shares to ``hold'' from ``buy.''

Old Mutual Plc dropped 4.5 percent to 96.4 pence after South Africa's biggest insurer named Julian Roberts as chief executive officer to replace Jim Sutcliffe, who has resigned as the company added to writedowns related to its U.S. business.

EasyJet Plc, Europe's second-biggest discount airline, lost 4.2 percent to 359.75 pence. UBS downgraded the shares to `sell'' from ``neutral,'' which said gains in the stock don't reflect challenges it faces next year.

Sanofi-Aventis SA gained 4.5 percent to 49.63 euros after the drugmaker named GlaxoSmithKline Plc's Chris Viehbacher as chief executive officer. Current chief Gerard Le Fur will continue to advise management.

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