European Stocks Fall on Economy Concern; BHP, Rio, BMW Decline

By Sarah Jones

Oct. 2 (Bloomberg) -- European stocks fell for the first time in three days, led by commodity producers and carmakers, as concern deepened the economic slowdown will hurt profit growth.

BHP Billiton Ltd. and Rio Tinto Group led mining companies lower, dropping more than 5 percent as metals prices declined. BG Group Plc sank 6.1 percent, following oil prices lower after U.S. jobless claims climbed to a seven-year high. Bayerische Motoren Werke AG slipped 4.2 percent after the world's largest maker of luxury cars said there'll be no recovery in auto markets until at least the middle of next year.

The Dow Jones Stoxx 600 Index lost 0.7 percent to 255.87 as of 3:29 p.m. in London. The index earlier climbed as much as 1.7 percent after UBS AG said it expects a ``small profit'' in the third quarter, spurring a rally in banking shares.

National benchmark indexes decreased in 14 of the 18 western European markets. France's CAC 40 sank 1.1 percent, and the U.K.'s FTSE 100 dropped 0.8 percent. Germany's DAX slumped 1.9 percent.

Europe's Stoxx 600 tumbled 30 percent this year as bailouts of financial companies worldwide accelerated and bank credit losses and writedowns approached $600 billion. Europe's regional index is valued at 11 times the earnings of its companies, near the level of 10.6 in July that was the lowest in at least six years, according to data compiled by Bloomberg.

The U.S. Senate yesterday approved a $700 billion bank rescue plan in an effort to stabilize the financial system. The plan, which was rejected earlier by the lower house of Congress, authorizes the purchase of troubled assets from financial companies. It passed the Senate with a 74-25 vote.

No Consensus

European officials have squabbled today over how to respond to the global credit crunch, with Germany opposing a coordinated approach and the Netherlands calling on states to set aside funds to help troubled banks. The conflict undermined efforts to build a consensus European strategy to counter the financial crisis.

The cost of borrowing in euros for three months rose to a record for a fifth day, signaling that banks haven't started to lend. The euro interbank offered rate, or Euribor, that banks charge each other for such loans climbed 4 basis points to 5.33 percent today, the European Banking Federation said.

BHP Billiton, the world's biggest mining company, sank 5.3 percent to 1,144 pence. Rio Tinto, the third largest, lost 6.9 percent to 3,245 pence. Copper, nickel, zinc and tin declined in London.

BG Group

BG Group, the U.K.'s third-biggest oil and gas company, fell 6.1 percent to 947.5 pence. BP Plc, Europe's second-biggest energy producer, slipped 2.1 percent to 454.5 pence.

Oil fell for a second day as the dollar reached a one-year high against the euro and U.S. fuel demand dropped to the lowest since the last recession.

BMW lost 4.2 percent to 24.995 euros after saying that it's prepared to deepen production cuts if demand continues to slide. The carmaker also said U.S. sales fell 26 percent last month.

UBS, the European bank with the most losses from the global credit crisis, rallied 11 percent to 21.78 francs. The company has posted $44 billion in writedowns and credit losses.

``UBS currently expects to report a small profit,'' the Zurich-based bank said. The company, which ``substantially reduced its U.S. commercial and residential mortgage-related positions,'' forecast 2009 will be a profitable year.

To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net.