European Stocks Decline; UBS, Deutsche Bank, Daimler Retreat

By Adria Cimino

Oct. 27 (Bloomberg) -- European stocks fell for the fifth straight day as concern grew that government efforts to stabilize financial markets won't avert a global recession.

UBS AG, Switzerland's largest bank, and Deutsche Bank AG, Germany's biggest, retreated more than 4 percent. Daimler AG slipped 8.3 percent after Frankfurter Allgemeine Sonntagszeitung reported the carmaker may halt production for five weeks.

The Dow Jones Stoxx 600 Index declined 1.4 percent to 196.14 at 2:10 p.m. in London. Reports showed German business confidence decreased more than forecast this month and U.K. house prices fell by the most in at least seven years in October and may keep declining as the economy deteriorates.

``The markets are very nervous,'' said Chicuong Dang, an equity analyst at KBL Richelieu Gestion in Paris, which has about $5 billion under management. ``There is the specter of the economic slowdown that would hurt earnings.''

More than $12 trillion has been erased from the market value of equities so far this month, accounting for about one- third of the total value wiped off stocks this year, as $680 billion of writedowns and losses by banks triggered a freeze in credit markets.

Iceland's Kaupthing Bank hf today was the first European borrower to default in Japan's samurai bond market after the state-controlled bank missed its last chance to make a 450 million yen ($4.8 million) coupon payment.

U.S. Treasuries rose as investors sought the safety of government bonds.

National Markets

National benchmark indexes declined in all of the 18 western European markets except Finland and Greece. The U.K.'s FTSE 100 lost 0.2 percent. Germany's DAX slid 0.7 percent. France's CAC 40 slumped 2.4 percent.

Stocks pared losses after a report showed sales of new houses in the U.S. unexpectedly rose and European Central Bank President Jean-Claude Trichet signaled he may cut borrowing costs as early as next week.

Sales of new homes rose in September from a 17-year low, propelled by a drop in prices ahead of the latest turmoil in financial markets.

Trichet said the bank may cut interest rates at its Nov. 6 meeting, depending on the inflation outlook.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.