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 mining and oil shares. U.S. index futures and Asian shares also declined.
Home Retail Group Plc sank 6.1 percent after the home- improvement chain reported lower sales. William Morrison Supermarkets Plc tumbled the most in four years after Chief Executive Officer Mark Bolland said he expects ``a tough second- half.'' Bank of Ireland Plc fell 4.4 percent after Dresdner Kleinwort warned of rising bad-debt levels. Lehman Brothers Holdings Inc. slumped 25 percent as Citigroup Inc. and Goldman Sachs Group Inc. downgraded the stock.
Europe's Dow Jones Stoxx 600 Index lost 1.6 percent to 273.03 as of 1:34 p.m. in London, extending this year's drop to 25 percent. Futures on the Standard & Poor's 500 Index fell 1.5 percent. The MSCI Asia Pacific Index decreased 2.4 percent.
``Economies around the world are clearly slowing,'' said Jeremy Beckwith, London-based chief investment officer at Kleinwort Benson, which oversees the equivalent of $13.1 billion. ``We will see substantial earnings revisions. I think people are getting fearful now and will get more fearful.''
Stocks extended declines after a report showed more Americans than forecast filed initial claims for unemployment insurance last week, while total benefit rolls rose to the highest level in almost five years.
National benchmark indexes dropped in all 18 western European markets. Germany's DAX declined 1.8 percent, as did the U.K.'s FTSE 100 lost 1.3 percent and France's CAC 40.
Anglo American Plc gained 3.1 percent as mining shares at their cheapest in seven years lured investors, while BG Group Plc rallied 4.3 percent on an oil discovery.
Cutting Forecast
Stocks retreated yesterday after the European Commission cut its forecast for the region's economic growth and investors speculated 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 sank 6.2 percent to 226.75 pence, the steepest drop since July. 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.
Morrison declined 6.9 percent to 251.75 pence after the smallest of the four main U.K. food retailers said it sees a ``highly competitive'' second half and plans to invest in price cuts. First-half profit declined 3.1 percent after income from real-estate sales dwindled and the tax bill rose.
Negative Data
Kingfisher Plc, Europe's largest home-improvement retailer, sank 6.5 percent to 128.6 pence.
Bernstein Research downgraded the shares to ``market- perform'' from ``outperform,'' saying the Confederation of British Industry data has been as ``negative as it gets'' in July and August on U.K. furniture and home appliances sales.
Analysts have slashed earnings estimates this year as the global economy cooled and the biggest surge in mortgage defaults in at least three decades pushed banks to write down assets. Profit for companies in the Stoxx 600 will slump 2.1 percent in 2008, down from 11 percent growth forecast at the end last year, according to data compiled by Bloomberg.
Bank of Ireland sank 7.1 percent to 5.13 euros after Dresdner cut its recommendation for the Dublin-based lender to ``sell'' from ``reduce.'' Allied Irish Banks Plc lost 3.1 percent to 7.85 euros after analysts also downgraded the nation's largest lender by market value to ``sell'' from ``hold.'' The shares recently traded at 8.03 euros.
Bad Debts
``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.
Lehman declined 25 percent to $5.46 in pre-market trading. Citigroup downgraded the shares to ``hold'' from ``buy,'' cutting the annual earnings-a-share estimate for the New York- based firm to a loss of $11.32 a share, compared with an earlier estimated loss of $8.26 a share.
Goldman Sachs changed its rating to ``neutral'' from ``buy'' and lowered its six-month price estimate by two-thirds to $7.
Oppenheimer & Co. analyst Meredith Whitney lowered her full- year earnings estimate for Lehman, saying the bank faces further writedowns after posting the biggest loss in its 158-year history yesterday. Whitney said Lehman may have an annual per-share loss of $10.24, compared with an earlier forecast of a $6.67 loss.
Bounce Overdue
Anglo American Plc, the second-largest, advanced 3.2 percent to 2,266 pence. Xstrata Plc increased 2.6 percent to 2,283 pence.
``We are long overdue a bounce'' in mining shares, said Tom Hougaard, the London-based chief market strategist at City Index Ltd. ``When you look at the mining sector, there has been a large drop in all the parameters. So much of the bad news has already been priced in.''
The Stoxx 600 Basic Resources Index has slumped 21 percent since July, pushing shares to their cheapest since April 2001. The index yesterday traded at 8.1 times earnings.
BG Group climbed 4.6 percent to 1,103 pence after the U.K.'s largest oil and gas company, 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.
Galp Energia, Portugal's largest oil company, jumped 6.7 percent to 12.12 euros.
CNP, Aegon
CNP Assurances SA and Aegon NV led a retreat by insurers after UBS AG downgraded the shares.
CNP, France's largest life insurer, lost 2.1 percent to 79.30 euros and Aegon, the owner of the U.S. insurer Transamerica Corp., slid 2.8 percent to 8.23 euros. UBS cut its rating on the companies' shares to ``sell'' from ``neutral.''
``Aegon needs to boost return on equity to improve the risk/return profile,'' London-based analyst Marc Thiele wrote in a note to clients today. He also fears ``more setbacks to new business'' at CNP.
Axa SA dropped 3.9 percent to 21.86 euros. UBS also lowered its recommendation for Europe's second-biggest insurer to ``neutral'' from ``buy.''
Bayerische Motoren Werke AG, the world's largest maker of luxury cars, lost 2.9 percent to 28.15 euros after Handelsblatt reported on its Web site that the carmaker is preparing to set aside higher risk provisions as problems with its leasing business are increasing.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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