Global Stocks, U.S. Futures Fall, Led by Carmakers; Yen Rallies

By Sarah Jones

Oct. 24 (Bloomberg) -- Stocks tumbled around the world and U.S. futures fell on concern the global economic slump will crimp earnings. Treasuries rose as investors sought the safest assets, and the yen climbed to a 13-year high against the dollar.

Trading in futures on the Standard & Poor's 500 Index and the Dow Jones Industrial Average was limited to prevent contracts from further declines after drops of more than 6 percent. The U.K.'s FTSE 100 Index sank 8 percent and the pound slid the most versus the dollar since 1971 after the economy shrank for the first time since 1992. South Korea's Kospi Index slumped 10 percent as the country's economy grew at the slowest pace in four years.

The MSCI World Index lost 3.8 percent to 876.09 at 2:05 p.m. in London, extending this week's retreat to 8 percent. Futures on the S&P 500 expiring in December fell 6.6 percent to 855.2, reaching the ``limit down'' level.

``The panic levels are now quite unseen,'' said Christian Gattiker, Zurich-based head of equity research at Bank Julius Baer & Co. which manages about $307.6 billion globally. ``It's difficult to have any words for this situation right now.''

The MSCI World has plunged 45 percent in 2008, headed for its worst year on record, as credit-related losses and writedowns topped $660 billion in the worst financial crisis since the Great Depression. More than $10 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 world equities this year.

Toyota Motor Corp. tumbled 6.4 percent following its first drop in quarterly sales in seven years. PSA Peugeot Citroen slipped 8.2 percent after cutting its forecast. General Motors Corp. slid 11 percent.

NYSE Trading

Trading below the ``limit down'' level for the S&P 500 futures will resume when U.S. exchanges open for regular trading at 9:30 a.m. New York time, said Jeremy Hughes, a London-based spokesman for the Chicago Mercantile Exchange.

The New York Stock Exchange will open for trading today, said Richard Adamonis, New York-based spokesman for the exchange.

Russia's Micex Stock Exchange suspended trading until next week after shares slumped as much as 15 percent.

Europe's Dow Jones Stoxx 600 Index slid 8.5 percent as Air France-KLM Group said it will struggle to meet profit targets. The MSCI Asia Pacific Index sank 5.6 percent.

The yen climbed against the dollar today as the risk of a global recession prompted investors to slash carry trades, in which they fund purchases of higher-yielding assets with the Japanese currency.

Treasuries Rally

Treasuries rose, sending the yield on the 30-year bond to the lowest since regular issuance of the securities began in 1977.

The pound tumbled below $1.53 in its biggest drop in at least 37 years after a report showed the U.K. economy contracted more than forecast in the third quarter, bringing the nation to the brink of a recession.

Another report showed Europe's manufacturing and service industries contracted at a record pace in October.

A measure of banks' willingness to lend, the London interbank offered rate for overnight dollars, rose for a second day after declining for nine days. The Libor-OIS spread, a gauge of cash availability that measures the difference between the three-month rate and the overnight indexed swap rate, widened 8 basis points to 262 basis points, the British Bankers' Association said.

Volatility Climbs

The VStoxx Index, which measures the cost of using options as insurance against drops in the Dow Jones Euro Stoxx 50 Index, rose as much as 34 percent to 86.61, a six-day high. The cost of protecting corporate bonds from default surged by a record.

Toyota sank 6.4 percent to 3,200 yen. The world's second- largest automaker reported a decline in quarterly sales for the first time in seven years as the financial crisis crippled worldwide auto demand.

Toyota sold about 2.236 million vehicles worldwide in the three months ended Sept. 30, down 4.3 percent from a year earlier.

``Automakers are being hit in terms of growth,'' said Amandine Gerard, a fund manager at KBL Richelieu Gestion in Paris, which oversees $5.1 billion. ``Job cuts and new models aren't sufficient. The industry is directly hurt by the slowdown.''

Peugeot retreated 8.2 percent to 16.435 euros after Europe's second-biggest carmaker cut its full-year sales and earnings targets. Third-quarter sales dropped 5.2 percent to 13.3 billion euros ($17 billion) amid a European auto-market slump.

The company said its full-year operating profit will amount to 1.3 percent of revenue, abandoning a 3.5 percent target, while vehicle sales probably will fall 3.5 percent.

GM, Ford

GM fell 11 percent to $5.40. The company reiterated today that bankruptcy is ``not an option.''

Speculation regarding GM's financial stability is unfounded, spokesman Tony Cervone said in an interview.

Ford Motor Co., the second-biggest U.S. carmaker, retreated 7 percent to $1.86.

Volvo AB sank 19 percent to 35.10 kronor. The world's second-largest maker of heavy trucks cut its industry growth outlook for this year after curtailing production as demand slows and some customers struggle to finance the purchase of new equipment. The European market for heavy trucks may be unchanged this year, while North America will contract by 10 percent, Volvo said.

Air France dropped 8.2 percent to 10.89 euros after Europe's biggest airline said it will be ``very difficult'' to meet its 1 billion-euro operating-profit target for the 12 months through March 2009.

Cutting Forecast

Analysts have cut profit forecasts this year as the credit turmoil spread, threatening economic growth. Earnings for companies in Europe's Stoxx 600 will decline 4.4 percent in 2008, down from 11 percent growth predicted the start of the year, according to estimates compiled by Bloomberg.

Anglo American Plc and Total SA led a retreat by commodity producers as base metals fell in London and crude oil dropped after OPEC agreed to cut oil production for the first time in almost two years.

Anglo American, the world's fourth-biggest diversified mining company, lost 6.6 percent to 1,158 pence as copper dropped for a fifth day. Rio Tinto, the world's third-biggest mining company, declined 7.6 percent to 2,069 pence.

Lead, nickel, tin and zinc also retreated on the London Metal Exchange.

Total, Europe's third-biggest oil company, fell 10 percent to 33.635 euros. Royal Dutch Shell Plc, Europe's largest oil company, declined 9.7 percent to 1,400 pence.

Crude Slumps

Crude for December delivery dropped as much as 7.1 percent to $63.05 a barrel on the New York Mercantile Exchange after 13 OPEC nations decided to reduce supply by 1.5 million barrels a day at a meeting in Vienna today.

HSBC Holdings Plc, Europe's largest bank, tumbled 16 percent to 676 pence. Morgan Stanley slashed its price estimate for the shares in Hong Kong by 25 percent as the contagion from the global turmoil spreads to Asia. The brokerage also lowered its price target for the London shares by 7.9 percent to 580 pence.

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