Stocks in Europe, Asia Fall; STMicro, Mizuho, Barclays Drop

By Adam Haigh

Sept. 5 (Bloomberg) -- Stocks in Europe and Asia fell, sending the MSCI World Index to its worst weekly slump since 2002, on concern weakening economic growth will curb earnings at semiconductor makers while credit-related losses at banks increase. U.S. index futures also declined.

STMicroelectronics NV, Europe's largest chipmaker, dropped 3 percent as UBS AG recommended selling the shares and cut its global sales-growth forecast for the industry by 50 percent. Merrill Lynch & Co. lost 4 percent in German trading, Barclays Plc sank 2.2 percent and Mizuho Financial Group Inc. tumbled 6.4 percent in Japan as Goldman Sachs Group Inc. advised clients to sell Merrill shares on concern the bank may post more writedowns. J Sainsbury Plc slid 2.8 percent after Deutsche Bank AG downgraded the supermarket chain, saying there are ``tough times ahead'' in the food and retail industry.

The MSCI World fell 12.51, or 1 percent, to 1,269.52 at 9:20 a.m. in London, extending its longest losing streak since February and bringing the weekly slump to 5.6 percent. The measure is down 20 percent in 2008 as subprime-related losses at global banks topped $500 billion and the global economy cooled.

``There are still lots of uncertainties out there,'' Andy Lynch, who manages about $3 billion at Schroder Investment Management Ltd. in London, said in a Bloomberg Television interview. ``Inflation is too high for central bank comfort and there are clear challenges for the world economy.''

Europe's Dow Jones Stoxx 600 Index retreated 1.4 percent as Infineon Technologies AG and William Morrison Supermarkets Plc also fell. The MSCI Asia Pacific Index sank 1.8 percent. Futures on the Standard & Poor's 500 Index slipped 0.4 percent.

U.S. Payrolls

The U.S. probably lost jobs in August for an eighth consecutive month, economists said before a government report today. Payrolls fell by 75,000 after declining by 51,000 in July, according to the median estimate of 76 economists in a Bloomberg News survey.

``Today we've got the non-farm payrolls and the market has moved quickly to tell us that the news is going to be bad,'' said David Evans, a trader at betting firm Betonmarkets.com in London.

Almost $17 trillion has been wiped off global stock markets since the peak in October 2007. Financial stocks have led the rout, with a measure for the industry in the MSCI World dropping 29 percent this year. Banks from UBS AG to Citigroup Inc. had to raise more than $360 billion in capital after contagion from the subprime-mortgage crisis in the U.S. eroded earnings.

The cost of protecting European corporate bonds from default rose today, according to traders of credit-default swaps.

`Difficult'

U.S. stocks tumbled yesterday, sending the Standard & Poor's 500 Index to the longest stretch of losses since January, after rising jobless claims heightened concern the economic slump is worsening and a decline in oil pushed energy producers lower.

STMicro lost 3 percent to 8.37 euros after UBS cut its recommendation on the shares to ``sell'' from ``neutral.'' The brokerage also slashed its 2009 revenue-growth forecast for semiconductors worldwide to 4 percent from 8 percent previously.

``The past couple of weeks have started to provide ample evidence that the second half of 2008 could be difficult for the semis industry,'' analysts Nicolas Gaudois and Richard Potter wrote in a research note.

ASML Holding NV, Europe's largest manufacturer of semiconductor equipment, lost 1.9 percent to 15.17 euros. Infineon AG, Europe's second-biggest maker of semiconductors, slipped 1.3 percent to 5.81 euros.

Merrill fell 4 percent to $25.15 in Germany. Barclays, the U.K.'s third-biggest bank, declined 2.2 percent to 322 pence. Mizuho, Japan's second-largest bank by assets, dropped 6.4 percent to 413,000 yen.

`Conviction Sell'

Goldman added Merrill, third-biggest U.S. securities company to its ``conviction sell'' list, according to a report by analysts including William Tanona. The share-price estimate was lowered 23 percent to $22.

J Sainsbury declined 2.8 percent to 337.75 pence after Deutsche Bank cut its recommendation for the U.K.'s third-largest supermarket chain to ``sell'' from ``hold.''

``We expect newsflow on inflation, industry growth and competition to deteriorate'' in the fourth quarter, analysts James Collins and Ingrid Azoulay wrote in a note to clients.

William Morrison retreated 1.1 percent to 276.25 pence. Deutsche Bank downgraded the shares to ``hold'' from ``buy.''

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