Global Stocks, U.S. Futures Tumble as Credit Concern Deepens

By Michael Patterson

Oct. 8 (Bloomberg) -- Stocks tumbled in Europe and Asia and U.S. index futures sank on concern the credit crisis will deepen, toppling more banks and pushing the global economy into recession. The dollar fell against the yen, while Treasuries rose.

Credit Suisse Group AG and Societe Generale SA fell more than 4 percent as the International Monetary Fund said financial institutions may need $675 billion in fresh capital. Slumps by bank stocks helped push Japan's Nikkei 225 Stock Average to its biggest drop since October 1987, while stock exchanges in Russia and Indonesia halted trading after their benchmark indexes tumbled more than 10 percent.

The MSCI World Index lost 2.8 percent to 1,010.85 at 8:05 a.m. in London, falling for the fifth day as all 10 industry groups retreated. Standard & Poor's 500 Index futures slid 2.1 percent.

The S&P 500 fell below 1,000 for the first time since 2003 yesterday, while the S&P 500 Financials Index slumped 12 percent to its lowest level since 1997 even after Federal Reserve Chairman Ben S. Bernanke signaled he is ready to cut interest rates.

``Investors are capitulating,'' said Oumkaltoum El Ouarti, a fund manager at KBL Richelieu Gestion, which has $6.2 billion in Paris. ``There's a crisis of confidence and actions so far haven't restored it. We need to see action on a global scale.''

$44 Billion Injection

Europe's Dow Jones Stoxx 600 Index declined 5.4 percent. Germany's DAX slipped 3 percent, while France's CAC 40 lost 3.6 percent. The U.K.'s FTSE 100 fell 2 percent.

Prime Minister Gordon Brown's government will invest at least 25 billion pounds ($44 billion) in an unprecedented step to prevent a collapse of the U.K. banking system. HBOS Plc and Lloyds TSB Group Plc advanced.

The MSCI Asia Pacific Index fell 6.9 percent today on concern slowing growth will cut demand for exports. Japan's Nikkei 225 Stock Average lost 9.4 percent.

The yen surged beyond 100 per dollar for the first time in six months after a plunge in Asian stocks prompted investors to reduce holdings of higher-yielding assets funded in Japan.

U.S. two-year note yields dropped 8 basis points to 1.39 percent, according to BGCantor Market Data.

Oil fell in New York, trading below $90 a barrel, as consumption weakens in the U.S. and other developed nations as the deepening credit crisis threatens economic growth.

$1.4 Trillion

The world's major banks may need $675 billion in fresh capital over the next several years to recover from a credit crisis that shows few signs of abating, the International Monetary Fund said yesterday.

In a report on the financial system, the Washington-based IMF raised its estimate of losses tied to U.S. loans and securitized assets to $1.4 trillion from $1.3 trillion two weeks ago. The IMF cut its forecast for global growth next year to 3 percent from an April prediction of 3.7 percent, according to the draft of its latest World Economic Outlook.

``As we've seen in the U.S., government intervention isn't freeing up credit markets and at the end of the day that is the key point,'' Matthew Buckland, a dealer at CMC Markets in London, wrote in a note to clients. ``If it's difficult for companies and individuals to get hold of credit, it's going to be difficult to stimulate growth and break out of this recessionary mindset.''

Today is the last day of a U.S. Securities and Exchange Commission rule banning short sales in more than 980 financial companies. Since it was announced Sept. 18, companies covered by the rule are down an average of 16 percent, according to data compiled by Bloomberg.

Stock Valuations

The Stoxx 600, which has lost 34 percent this year, was valued at 10 times the reported earnings of companies in the index yesterday, the cheapest since Bloomberg began compiling the data in January 2002. The MSCI World Index was valued at 12.4 times profit yesterday, the cheapest since at least 1995, while the Standard & Poor's 500 Index traded for 19 times earnings.

Credit Suisse dropped 4.4 percent to 48 francs, and Societe Generale slumped 6.4 percent to 56.655 euros.

HBOS, the U.K. bank that agreed to be bought by Lloyds TSB, added 6.4 percent to 100 pence. Lloyds TSB climbed 4.3 percent to 235.25 pence.

The U.K. government will buy preference shares, and the Bank of England will make at least 200 billion pounds available for banks to borrow under the so-called special liquidity plan, the Treasury said in a Regulatory News Service statement today. The government will also provide a guarantee of about 250 billion pounds to help refinance debt.

Commodities Drop

BHP Billiton Ltd., the world's largest mining company, dropped 6.4 percent to 1,017 pence. Rio Tinto Group, the third- largest, declined 7 percent to 2,714 pence. Copper, the metal used in wires and pipes, dropped 4.4 percent to $5,380 earlier, the lowest intra-day level since February 8, 2007.

BP, Europe's second-biggest oil company, fell 2.2 percent to 437.25 pence. Total SA sank 2.4 percent to 39.065 euros.

Crude oil for November delivery slumped as much as $1.44, or 1.6 percent, to $88.62 a barrel in electronic trading on the New York Mercantile Exchange.

J Sainsbury Plc slid 5.8 percent to 296.5 pence. The third- largest U.K. supermarket chain said revenue climbed 4.3 percent at stores open at least a year excluding gasoline in the 16 weeks ended Oct. 4 and that it sees a challenging environment through the second-half. The British retailer said customers are cooking more for themselves.

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.