Stocks in Europe, Asia Decline; BHP, Hon Hai, Retailers Slump

By Adam Haigh

Sept. 1 (Bloomberg) -- Stocks in Europe and Asia declined, led by raw-materials producers and consumer companies, as metals prices dropped and concern mounted that the economic slowdown will curb earnings.

BHP Billiton Ltd., the world's largest mining company, sank for the first time in four days after copper, nickel and tin prices fell in London. Hon Hai Precision Industry Co., which makes iPods for Apple Inc. and Wii game consoles for Nintendo Co., retreated by the daily limit in Taipei after posting its first profit drop in seven years. LG Electronics Inc., the world's third-biggest television maker, slumped 9.6 percent as South Korea's exports grew less than forecast.

Europe's Dow Jones Stoxx 600 Index lost 0.6 percent to 286.59 as of 2:10 p.m. in London, dropping for the first time in five days. The MSCI Asia Pacific Index fell 1.8 percent. U.S. markets are closed today for the Labor Day holiday. Futures on the Standard & Poor's 500 Index decreased 0.2 percent. Brazil's benchmark Bovespa Index slipped 0.3 percent.

``Economic growth is slowing, but I think investors are still trying to get to grips with how bad that could be in terms of bearing down on corporate profit margins,'' said Ian Vose, head of global developed markets at Scottish Widows Investment Partnership, which has $164 billion in assets under management. ``We don't see those fears abating in the near term,'' he said in a Bloomberg Television interview.

Crude Oil

Losses in the Stoxx 600 were limited as crude oil retreated on a forecast that Hurricane Gustav is unlikely to intensify in the Gulf of Mexico before striking land. Michelin & Cie. also helped spur gains among carmakers and automotive suppliers after Merrill Lynch & Co. recommended buying the tiremaker's shares.

The MSCI World Index fell 1.6 percent last month, led by basic-resources stocks, as lower metals prices damped the earnings outlook for mining companies. The measure has declined 16 percent this year as the global economy cooled and the world's largest banks posted writedowns and credit losses of more than $500 billion.

Profits for companies in the Stoxx 600 will drop 2.1 percent on average in 2008, Bloomberg data shows. That compares with 11 percent growth forecast at the end of last year.

The strains in the global money markets that pushed relative borrowing costs higher will probably persist ``for some time'' as financial institutions struggle to raise cash, according to the Bank for International Settlements.

Housing Slump

In the U.K., house prices slid by the most since at least 2001 in August as economic growth stagnated, Hometrack Ltd. said. The London-based research company added that an end to the property slump is ``still some way off.''

U.K. mortgage approvals dropped to the lowest since at least 1999 and manufacturing contracted for a fourth month as the economy staggered toward a recession, reports showed today.

The U.K. Chancellor of the Exchequer Alistair Darling said the nation is facing the worst economic crisis in 60 years, the Guardian newspaper reported. He then told the Sunday Telegraph he was referring to global conditions rather than those in Britain.

BHP and Rio Tinto Group led declines among basic-resources companies. Copper fell as global inventories of the metal reached the highest in almost seven months, increasing concern a spreading global economic slowdown will reduce demand.

BHP retreated 2.6 percent to 1,674 pence, while Rio Tinto, the world's third-biggest mining company, lost 1.9 percent to 5,128 pence.

Home Retail Group Plc, owner of U.K. store chains Argos and Homebase, declined 3.3 percent to 245.5 pence. PPR SA, the French retailer that owns Gucci, sank 4.2 percent to 76.34 euros.

`More Hurt'

``In Europe, we're more hurt by the slowdown than expected,'' Salah Seddik, a fund manager at Richelieu Finance in Paris, which oversees $6.2 billion, said in a Bloomberg Television interview.

German retail sales, adjusted for inflation and seasonal swings, dropped 1.5 percent from June, when they fell 1.4 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a decline of 0.3 percent, the median of 32 estimates in a Bloomberg News survey shows.

Carrefour SA retreated 3.1 percent to 35.02 euros. JPMorgan Chase & Co. downgraded the world's second-largest retailer to ``underweight'' from ``neutral,'' saying there's ``no reason for excitement'' following the 7.2 percent share-price gain Aug. 29.

Hon Hai tumbled NT$11 to NT$149. Second-quarter net income dropped 24 percent to NT$11.9 billion ($378 million), missing the average estimate of NT$14.9 billion in a Bloomberg News survey of analysts.

South Korean Exports

LG Electronics, which counts North America as its largest overseas market, sank 9,700 won to 91,800 won. South Korean exports rose 20.6 percent in August from a year earlier, missing the 23.3 percent median estimate of economists surveyed by Bloomberg News.

Commerzbank AG tumbled 9 percent to 18.28 euros after agreeing to buy Allianz SE's Dresdner Bank for 9.8 billion euros ($14.4 billion) in Europe's biggest financial-services takeover this year.

``We have certain doubts concerning the underlying earnings capacity of Dresdner Bank and regard the purchase price as relatively high,'' Andreas Weese, a Munich-based analyst at UniCredit Markets & Investment Banking wrote in a report. Allianz shares were little changed.

Iliad SA retreated 3.2 percent to 68.26 euros as Merrill Lynch & Co. downgraded the French provider of broadband Internet to ``underperform'' from ``buy.''

Michelin, the world's second-largest tiremaker, rallied 4.8 percent to 46.55 euros. Merrill upgraded the stock to ``buy'' from ``neutral,'' citing declining oil prices and an aging fleet of cars needing replacement parts.

GDF, Alstom

GDF Suez SA, the world's second-biggest utility, added 2.3 percent to 40.28 euros after saying first-half profit rose 14 percent on higher power and natural gas prices.

Alstom SA, whose power stations generate one-fifth of the world's electricity, advanced 3.5 percent to 72.07 euros on speculation it may join the Euro Stoxx 50 Index. Stoxx Ltd. announces the results of its quarterly review today after European markets close, said Christian Stocker, an index strategist at UniCredit in Munich.

``There's a rumor that Alstom may replace Alcatel in the Eurostoxx Index and that's helping the shares,'' said Marie- Caroline Messager, senior equities manager at Newedge in London.

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