By Adam Haigh
Oct. 31 (Bloomberg) -- Stocks fell in Europe and Asia, extending the MSCI World Index's worst monthly slump on record, as concern deepened the economic slowdown will stifle profit growth. U.S. index futures retreated.
L'Oreal SA lost 8.5 percent after the world's biggest cosmetics company reduced its profit forecast as consumers cut purchases. BT Group Plc, the U.K.'s largest phone company, tumbled 21 percent after saying second-quarter earnings missed its targets. Barclays Plc slipped 11 percent after the bank took 1.2 billion pounds ($1.9 billion) of new credit markdowns.
``Some of the corporate news is showing you that the real world is deteriorating rapidly,'' said Neil Dwane, chief investment officer for Europe at Allianz Global Investors' RCM unit who oversees $65 billion. ``The situation is still far too uncertain.'' Dwane spoke in a Bloomberg Television interview.
The MSCI World Index lost 0.9 percent to 943.38 at 12:35 p.m. in London as all 10 industry groups decreased. Europe's Dow Jones Stoxx 600 Index declined 0.5 percent as Akzo Nobel NV and BHP Billiton Ltd. retreated.
Earnings for the 754 companies in western Europe that reported results since Oct. 7 declined 5.3 percent on average, trailing analysts' expectations by 2.2 percent, according to data compiled by Bloomberg. Companies from Nokia Oyj, the world's biggest maker of mobile phones, to BASF SE, the largest chemicals supplier, have reported earnings that missed analyst estimates.
Standard & Poor's 500 Index futures expiring in December slipped 1.3 percent. Spending by U.S. consumers fell more than forecast in September, capping its weakest quarter in three decades.
Asian Equities
Asian stocks fell, adding to the regional benchmark index's worst month ever, as a record three-day rally fizzled after companies slashed profit forecasts and metals prices tumbled. The MSCI Asia Pacific Index retreated 2.1 percent as Mazda Motor Corp. fell 14 percent after projecting lower earnings.
The MSCI World of 23 developed countries has slumped 20 percent in October, headed for the worst month since records began in 1970, as central banks and governments from Washington and London to Beijing and Tokyo stepped up efforts to salvage the global economy amid the deepest financial crisis since the Great Depression.
This month's sell-off erased more than $9.5 trillion from the value of stocks worldwide, almost one-third of the total value lost this year, as credit-related losses and writedowns by financial firms topped $684 billion.
Credit Markets
Stocks rebounded this week, with the MSCI World climbing back from a five-year low reached on Oct. 27, amid signs the paralysis in credit markets was easing. UBS AG and Daimler AG led gains in Europe.
The Federal Reserve cut rates this week for the second time this month and provided $120 billion to South Korea, Singapore, Brazil and Mexico to unlock lending in emerging markets. The Bank of Japan today joined central banks from China, Hong Kong and Taiwan in also reducing borrowing costs. European Central Bank President Jean-Claude Trichet said Oct. 27 he may lower rates next week as the financial crisis damps inflation.
The MSCI Emerging Markets Index has lost 28 percent in October even after a 20 percent rally this week. Russia's Micex Index soared 38 percent from this year's low on Oct. 24, bringing the measure out of a bear market as the government bought equities to shore up confidence.
Iceland was the worst-performing market this month following the collapse of the nation's largest banks. The OMX Iceland ICEX 15 plunged a record 81 percent, the biggest drop among 89 benchmark indexes monitored by Bloomberg worldwide.
Money Rates Ease
Money-market rates have eased. The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars dropped more than 16 basis points to 3.03 percent, its 15th straight decline, the British Bankers' Association said.
Meanwhile, corporate debt markets in Europe endured their worst month on record as investors demanded the highest yields relative to government debt in a decade to buy corporate bonds.
The cost of credit-default swaps on the Markit iTraxx Crossover Index surged as high as 925 basis points, up from 171 before the crisis started last year, and a gauge of leveraged loan prices plummeted almost 20 percent.
Stocks rose yesterday in the U.S. after a report showed the world's largest economy contracted less than forecast in the third quarter.
Intel Corp., the world's largest computer-chip maker, said the global financial crisis could hurt its business. The shares fell 2.8 percent to $15.72 in German trading today.
Negative Effect
``The recent financial crisis could negatively affect our business, results of operations and financial condition,'' the company said in the risk factors section in its 10-Q quarterly filing with the Securities and Exchange Commission today.
In Europe, reports today indicated Spain's economy is shrinking, while consumer confidence in the U.K. slumped in October close to the weakest level since at least 1974. Retail sales in Germany, the region's largest economy, fell more than economists expected last month.
L'Oreal sank 8.5 percent to 55.67 euros. The cosmetics maker cut sales and profit forecasts for the third time in less than four months. Third-quarter sales increased 3.4 percent to 4.27 billion euros ($5.5 billion), missing the 4.36 billion-euro median estimate of nine analysts surveyed by Bloomberg News.
BT, BHP
BT Group slumped 21 percent to 112.4 pence. Second-quarter earnings missed its targets amid the economic slowdown. Earnings before interest, taxes, depreciation and amortization as well as earnings per share were ``slightly below expectations'' in the three months through September, the company said.
Barclays lost 11 percent to 183.2 pence. The second-biggest U.K. bank took 1.2 billion pounds ($1.9 billion) of new credit markdowns, adding to 2.8 billion pounds in the first half, it said today. It will sell 5.8 billion pounds of convertible notes to investors including funds in Abu Dhabi and Qatar to restore capital without tapping the U.K.'s bailout plan.
BHP Billiton declined 1.2 percent to 996 pence. Copper fell 4 percent to $4,035 in London, headed for its worst month since at least 1986, amid signs the global financial crisis is curbing demand for raw materials.
Akzo Nobel NV, the biggest maker of coatings and paints, slipped 1.8 percent to 31.57 euros. Credit Suisse Group AG cut its recommendation on the shares to ``underperform'' from ``neutral.'' The outlook has ``become worse'' since the company reported earnings, London-based analyst Rhian Tucker wrote in a note to clients today.
Profit Outlook
Sanofi-Aventis SA rose 2.4 percent to 48.26 euros after France's largest drugmaker raised its forecast for a second time this year and reported third-quarter profit that beat analyst estimates. Net income excluding some items was 1.92 billion euros ($2.46 billion), or 1.47 euros a share, beating the median 1.41-euro estimate of five analysts surveyed by Bloomberg.
Analysts have cut profit forecasts this year as the credit turmoil spread and threatened economic growth. Earnings for companies in the 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.
Mazda Motor Corp., which surged 50 percent in the previous three days, fell 14 percent to 213 yen in Tokyo. The company cut its profit forecast by 29 percent yesterday on falling U.S. sales and higher raw materials costs.
A recent New York Times/CBS poll showed Barack Obama with 52 percent support among likely voters, compared with 41 percent for John McCain before the national election on Nov. 4. The poll was taken Oct. 25-29.
Election History
Election history shows U.S. stocks have a better chance in the first year of a Obama presidency than a McCain administration.
Since 1900, the Dow Jones Industrial Average rose 9.8 percent in the 12 months after the Democratic Party captured the White House, based on the median change following the election of seven Democrats from Woodrow Wilson to Bill Clinton. Only twice did the average decline, after Wilson's victory in 1912 and Jimmy Carter's in 1976. The S&P 500 index is down 18 percent this month.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
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