Stocks in Europe, Asia Decline; BHP Billiton, Vodafone Retreat

By Adam Haigh

Sept. 3 (Bloomberg) -- Stocks in Europe and Asia dropped on concern a slowing economy is dimming the earnings prospects for commodity producers while credit-market losses at banks increase. U.S. index futures were little changed.

BHP Billiton Ltd. fell for a third day and Rio Tinto Group slipped 1.2 percent as gold and oil prices declined. Vodafone Group Plc sank 2.4 percent after Credit Suisse Group AG cut its recommendation on the shares and said the world's largest mobile- phone company is likely to miss its new sales forecast. UBS AG led declines among financial companies as Ospraie Management LLC said it will close its biggest hedge fund.

The Dow Jones Stoxx 600 Index lost 1 percent to 287.24 at 8:08 a.m. in London. The MSCI Asia Pacific Index fell 0.5 percent. Futures on the Standard & Poor's 500 Index expiring in September added less than 0.1 percent.

``We would stay very cautious on everything that is commodity-related,'' said Philippe Gijsels, Brussels-based senior equity strategist at Fortis Global Markets with $62 billion under management. ``There are maybe some more capital increases to come'' for financial firms, he added.

Stocks in the U.S. fell yesterday as a slump in commodity producers overshadowed gains in airlines and consumer companies after oil sank to a five-month low.

The MSCI World Index has declined for three straight days this week following a 1.6 percent August retreat that was led by metals producers on concern slowing demand for the raw materials is undermining the earnings capacity of the companies. The measure is down 17 percent this year after the global economy cooled and the world's largest banks posted writedowns and credit losses of more than $500 billion.

Mining Shares

BHP Billiton, the world's biggest mining company, fell 1 percent to 1,542 pence, while Rio Tinto, the third-largest, lost as 1.2 percent to 4,736 pence.

Crude oil retreated for a fourth day as Hurricane Gustav caused minimal damage to refineries and rigs in the Gulf of Mexico and a strengthening dollar curbed the appeal of commodities as an inflation hedge.

There's ``the slowing demand to take into account here and this serves as something of a reminder as to the current health of the global economy,'' said Matt Buckland, a trader at CMC Markets in London.

Financial shares declined as Ospraie, the investment firm run by Dwight Anderson, said it will close. The Ospraie Fund fell 26.7 percent in August alone after a ``substantial sell-off'' in a number of its energy, mining and resource equity investments, Anderson, 41, said in a letter to investors yesterday. Jonathan Gasthalter, a spokesman for Ospraie, declined to comment.

Banks Drop

UBS, Switzerland's largest bank, declined 1 percent and Credit Suisse, the second-biggest, lost 0.9 percent.

Lehman Brothers Holdings Inc. slumped 5 percent to $15.32 in German trading. The securities firm bought a 20 percent stake in Ospraie Management in 2005.

Barclays Plc slid 2.8 percent to 353.5 pence after Royal Bank of Scotland Group Plc said the U.K.'s third-biggest bank may need to raise as much as 7.5 billion pounds ($13.3 billion) to bring its capital ratio in line with investment banking peers. The shares were cut to ``sell'' from ``hold.''

Svenska Handelsbanken AB fell 1 percent to 98.75 kronor and Swedbank AB sank 1.7 percent to 115 kronor after having their recommendations cut by UBS, which said the Swedish banks are ``heading from good times to bad.''

Handelsbanken, Sweden's second-largest bank by market value, was reduced to ``sell'' from ``neutral,'' while Stockholm-based Swedbank, the biggest bank in the Baltic states, was downgraded to ``neutral'' from ``buy'' by analyst Andreas Hakansson.

Theolia SA slumped 10 percent to 12.60 euros after the French wind-power company part-owned by General Electric Co. had a loss in the first-half and lowered its full-year target for operating profit on a plan to sell less wind capacity and produce more power.

Vodafone dropped 2.4 percent to 140.8 pence. Credit Suisse lowered its recommendation on the mobile-phone company to ``neutral'' from ``outperform.''

``We believe Vodafone is likely to slightly miss its new revenue guidance on an underlying basis,'' analysts Justin Funnell and Paul Sidney wrote in a note.

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