Stocks in Europe, Asia Decline; U.S. Futures Are Little Changed

By Adam Haigh

Oct. 15 (Bloomberg) -- Stocks in Europe and Asia fell for the first time in three days, led by commodity producers, on speculation $2 trillion in funds for banks to rescue the financial system won't be enough to avert a recession. U.S. index futures were little changed.

BHP Billiton Ltd. dropped 2.8 percent and Royal Dutch Shell Plc slipped 1.6 percent as copper and oil retreated and Federal Reserve Bank of San Francisco President Janet Yellen said the U.S. is in a recession. Bayerische Motoren Werke AG sank 2 percent as European car sales slumped for a fourth straight month in September.

The MSCI World Index lost 0.3 percent to 1,019.77 at 8:05 a.m. in London, following the biggest two-day rally on record. Europe's Dow Jones Stoxx 600 Index declined 1.4 percent, while the MSCI Asia Pacific Index decreased 1.1 percent. Futures on the Standard & Poor's 500 Index slipped less than 0.1 percent.

``We don't have much of a rosy outlook in terms of global growth next year, that is what is worrying markets at this stage,'' said Christian Gattiker, Zurich-based head of equity research at Bank Julius Baer & Co., in a Bloomberg Television interview. ``We have much more to go in terms of earnings deterioration.'' Parent company Julius Baer Holding AG has about $328 billion.

Stocks in the U.S. declined yesterday after PepsiCo Inc. cut its profit forecast. Asian shares fell today as Posco, the region's third-largest steelmaker, said demand will be lower this quarter.

The MSCI World rallied 12 percent in the previous two days as governments and central banks worldwide announced bailouts and funding to unfreeze credit markets and prevent the collapse of the global banking system.

The Bush administration said yesterday it was investing $250 billion to purchase stakes in U.S. financial companies.

`Critical Step'

The government's plan is ``a critical step toward financial stability,'' Yellen said after a speech late yesterday in Palo Alto, California. Adequate capital is ``a prerequisite for the restoration of confidence in the financial system.''

The U.S. is already in a recession by most accounts, according to economists surveyed by Bloomberg News this month.

European Union leaders meet today to in Brussels to discuss the next steps in responding to the global market meltdown.

The Stoxx 600 was valued at 8.5 times earnings of companies in the index last week, the cheapest on record, and climbed to 9.7 times profit yesterday. The MSCI World Index traded at 11 times the earnings of its 1,730 companies on Oct. 10, the lowest on record, and closed yesterday at 12.2 times profit.

``Recession beckons,'' David Buik, an equity markets analyst at BGC Partners, said in a Bloomberg Television interview in London. ``There is a realization that the relief rally is over.''

BHP, Rio Tinto

BHP Billiton, the world's largest mining company, declined 2.8 percent to 1,047 pence. Copper, lead, and nickel prices slid on the London Metals Exchange.

Rio Tinto Group, battling a $86 billion takeover bid from BHP Billiton, may delay the planned sale this year of $10 billion of assets because of the global financial crisis. The shares lost 2 percent to 2,770 pence.

Shell, Europe's biggest oil producer, slid 1.6 percent to 1,472 pence.

Crude oil for November delivery fell as much as 74 cents, or 0.9 percent, to $77.89 a barrel in after-hours trading on the New York Mercantile Exchange.

``There is an element of concern as to the longer term economic outlook,'' said Matt Buckland, a trader at CMC Markets in London. ``Falling commodity prices certainly have scope to take the shine off miners and petrochemicals stocks.''

BMW, ASML

BMW, the world's biggest luxury car maker, dropped 2 percent to 22.07 euros.

European car sales fell 8.2 percent last month, extending a decline that began in May, as higher fuel prices and financial- market turmoil reduced demand for models from BMW and General Motors Corp.

ASML Holding NV sank 6.9 percent to 10.15 euros. Europe's largest maker of semiconductor equipment said third-quarter profit fell 56 percent on lower machine sales after chipmakers delayed expansion plans.

Clariant AG, the world's biggest maker of chemicals used in printing ink, slipped 1.9 percent to 8.85 francs as Citigroup Inc. cut its recommendation on the shares to ``sell'' from ``hold,'' saying the current ``rocky economic path'' would impact European chemical producers.

----With reporting by Rishaad Salamat in London. Editor: Stephen Kirkland, Daniel Hauck.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net