European, U.S. Stock Futures Drop; UBS, Deutsche Bank May Fall

By Adria Cimino

Oct. 27 (Bloomberg) -- European stock-index futures dropped, following declines in Asia, on concern the global economic slowdown is worsening. U.S. futures slid, indicating the market may extend the biggest monthly plunge in 70 years.

U.S.-traded shares of UBS AG, Switzerland's largest bank, and Deutsche Bank AG, Germany's biggest, retreated. Daimler AG may be active after Frankfurter Allgemeine Sonntagszeitung reported the carmaker may halt production for five weeks.

Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, lost 136, or 5.9 percent, to 2,190 at 7:25 a.m. in London. The U.K.'s FTSE 100 Index may decrease 78, according to Cantor Index, a betting firm. Futures on the Standard & Poor's 500 Index dropped 4.2 percent, and the MSCI Asia Pacific Index sank 6.5 percent, extending a three-day, 13 percent retreat.

Stocks in the U.S. fell on Oct. 24 as concern deepened the financial crisis is plunging the world's economy into a recession. Iceland's Kaupthing Bank hf today became 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.

``After last week's turmoil in equity markets many had been hoping that the new week would bring about a degree of stability but at least so far there's little to suggest this will be the case,'' Matthew Buckland, a dealer at CMC Markets in London, wrote.

The yen rose to near a 13-year high against the dollar as Group of Seven industrialized nations' concern over the currency's ``excessive volatility'' failed to halt investors from selling higher yielding assets. Separately, Japan's Prime Minister Taro Aso said he'd draft measures to help counter the financial crisis.

Ukraine Bailout

The International Monetary Fund reached agreement with Ukraine on a $16.5 billion loan to help support the nation's financial system as recession concerns sweep eastern Europe. The Bank of Korea slashed interest rates by a record at an emergency board meeting in an attempt to bolster markets.

Asian money-market rates rose amid speculation the global credit crisis is worsening even after governments and central banks pledged to spend trillions of dollars worldwide to revive lending.

The S&P 500 has plunged 25 percent in October, headed toward the steepest monthly loss since 1938. The MSCI World Index is down 27 percent this month, and a close at this level would be the biggest monthly decline since records began in 1970.

Europe's Dow Jones Stoxx 600 Index has fallen 22 percent this month, its worst month since the market crash in October 1987.

Credit Losses

The Stoxx 600 has tumbled 45 percent this year as $680 billion of asset writedowns and credit losses by banks triggered a freeze in credit markets. The benchmark is valued at 8.2 times the reported earnings of companies in the index, the lowest since Bloomberg began tracking the data in 2002.

American depositary receipts of UBS lost 3.3 percent from the stock's close last week in Zurich. ADRs of Deutsche Bank sank 6.2 percent from last week's close.

``The economic downturn is of an amplitude that was underestimated,'' said Christophe Donay, chief strategist at Pictet & Cie. in Geneva. ``The economy will weigh on companies' sales.''

The U.S. economy shrank last quarter for the second time in a year as consumers and companies pulled back, reports this week may show. Gross domestic product contracted at a 0.5 percent annual rate from July to September, according to the median estimate in a Bloomberg News survey before Commerce Department figures due Oct. 30.

Daimler, RBS

Daimler, the world's second-largest maker of luxury cars, will halt production for five weeks as demand slows, Frankfurter Allgemeine Sonntagszeitung said. Daimler spokesman Florian Martens wasn't immediately available for a statement.

Royal Bank of Scotland Plc may need to write down the value of assets by between 4 billion pounds ($6.3 billion) and 5 billion pounds in the second half of the year, the Financial Times reported, citing analysts it didn't identify.

The bank doesn't comment on speculation, said a spokesman who declined to be identified by name when contacted by Bloomberg News.

Swedbank AB, the largest bank in the Baltics, said it will raise 12.4 billion kronor ($1.6 billion) in a rights offering. The operation will lift its core Tier 1 ratio to 9.2 percent, the bank said.

Merck KGaA, the German maker of the Erbitux cancer drug, said third-quarter profit increased more than fivefold to 200.1 million euros ($251 million) from a year earlier when the $14 billion purchase of Serono SA weighed on results. Analysts predicted 202 million euros, according to the median of seven estimates in a Bloomberg survey.

Persimmon, Volkswagen

Persimmon Plc, the U.K.'s biggest homebuilder by market value, said it will book 600 million pounds ($938.9 million) in land writedowns after house prices fell during the U.K.'s worst housing slump in 25 years.

Volkswagen AG may climb as Porsche SE's plans to raise its holding in the company to 75 percent next year. Volkswagen shares were quoted between 265 euros and 295 euros in Frankfurt pre-market trading at Lang & Schwarz Wertpapierhandelsbank AG, suggesting an advance of as much as 40 percent form last week's close.

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