By Sarah Thompson
Nov. 17 (Bloomberg) -- Stocks fell in Europe and Asia and U.S. index futures dropped, extending the worst slump in global shares in more than three decades, after Japan unexpectedly slid into a recession.
Santander SA, Spain's biggest bank, and BNP Paribas SA of France slipped more than 6 percent. HeidelbergCement AG tumbled 16 percent on concern the cement maker's owner may have to sell shares to help prop up an investment company. Mitsubishi Estate Co., Japan's largest developer by market value, sank 5.4 percent.
The MSCI World Index lost 0.6 percent to 874.04 at 1:25 p.m. in London, pushing this year's retreat to 45 percent. Japan's economy unexpectedly shrank in the third quarter, entering the first recession since 2001, while Britain's biggest business lobby said the U.K. slump may be deeper than earlier predicted.
``We are not seeing any kind of recovery at all in the world economy,'' said Gianluca Tarolli, a Geneva-based equity strategist at Lombard Odier Darier Hentsch & Cie., which has the equivalent of $134 billion under management. ``We are cautious and are underweight equities. We have a lot of concerns about growth overall in Europe.''
Europe's Dow Jones Stoxx 600 Index declined 1.7 percent, with Tesco Plc sliding 4.1 percent after JPMorgan Chase & Co. recommended selling shares in Britain's biggest retailer. The MSCI Asia Pacific Index decreased 0.4 percent. Futures on the Standard & Poor's 500 Index slipped 0.8 percent.
More than $30 trillion has been erased from the value of global equity markets this year as credit losses and writedowns totaled $966 billion in the worst financial crisis since the Great Depression. The MSCI World is headed for its steepest annual drop since records began in 1970.
`Longer' Recession
Gross domestic product in Japan, the world's second-largest economy, shrank an annualized 0.4 percent in the three months ended Sept. 30, compared with 0.1 percent growth predicted by economists.
The U.K. economy will contract the most in almost three decades next year, the Confederation of British Industry, the nation's biggest business lobby, said. GDP will drop 1.7 percent in 2009, the most since 1980, the CBI predicted. The recession is ``likely to be deeper and longer lasting,'' according to CBI.
House prices in the U.K. are falling at the fastest pace since at least 2002, Rightmove Plc said today. The average asking price for a home fell 7.1 percent from a year earlier, the most since records began six years ago, according to the country's most-used property Web site.
Santander, HBOS
Santander, the Spanish bank that owns U.K. mortgage lender Abbey, lost 6.4 percent to 6.11 euros. HBOS Plc, the U.K. bank that agreed to be bought by Lloyds TSB Group Plc, sank 11 percent to 76.7 pence. BNP Paribas, France's biggest bank, dropped 6.3 percent to 43.855 euros.
The cost of borrowing dollars for three months in London increased for a third day as banks balked at lending on concern concern about the severity of the global recession. The London interbank offered rate, or Libor, banks say they charge each other for such loans rose less than half a basis point to 2.24 percent. The Libor-OIS spread, a gauge of cash scarcity among banks, narrowed less than one basis point to 173 basis points.
The U.S. has entered a recession that will persist into next year, and economies around the world will follow suit, a survey showed. After growing 1.4 percent this year, the U.S. will contract 0.2 percent in 2009, according to the median estimate in a poll taken by the National Association for Business Economics. A majority of respondents said the U.K., euro area, Japan, Canada and Mexico are either now, or will soon be, in a recession.
Citigroup's Jobs Cuts
Citigroup Inc., the fourth-largest U.S. bank by market value, plans to eliminate 50,000 jobs, or about 14 percent of the workforce as of Sept. 30, and reduce expenses by 20 percent from their peak as the global economy contracts. The reductions were disclosed in a presentation posted on the company's Web site. Citigroup slipped 12 cents to $9.40 in pre-market trading.
President-elect Barack Obama and House Speaker Nancy Pelosi may throw as much as half a trillion dollars worth of stimulus at the economy -- and have little or no growth to show for it. The consolation, economists say, is that without the stimulus, things would be even worse.
In western Europe, national benchmark indexes declined in 17 of the 18 markets. The U.K.'s FTSE 100 slipped 1.8 percent. Germany's DAX sank 2.3 percent and France's CAC 40 lost 2 percent.
HeidelbergCement, Germany's biggest cement maker, tumbled 16 percent to 43 euros on concern its billionaire owner Adolf Merckle may have to sell shares to help prop up one of his investment companies.
Tesco, Bodycote
Tesco lost 4.1 percent to 317.1 pence. JPMorgan said discount grocer Aldi Group poses a ``major threat'' and cut its recommendation to ``underweight'' from ``neutral.''
Bodycote Plc sank 23 percent to 94.75 pence after the U.K. supplier of metal-strengthening services to Ford Motor Co. said it will halve a 260 million-pound ($383 million) payment to shareholders to pay off debt in light of financial market turmoil.
United Internet AG tumbled 10 percent to 5.43 euros after Credit Suisse Group AG cut Germany's third-largest Web-access provider to ``underperform'' from ``neutral,'' citing ``weaker- than-expected'' third-quarter results.
``We believe risk to 2009 conensus could be greater given a worsening European economy and ongoing DSL (digital subscriber line) competition,'' the bank added.
Parmalat SpA fell 5.4 percent to 1.215 euros after Italy's largest dairy company cut its annual profit and sales forecasts as pressure on incomes spur more shoppers to pass up its branded products for goods carrying food retailers' own names.
Nokia
Nokia Oyj climbed 2.3 percent to 10.18 euros after Merrill Lynch & Co. and Sanford C. Bernstein upgraded the world's largest mobile-phone maker.
Merrill Lynch's Andrew Griffin raised his recommendation for Espoo, Finland-based Nokia to ``buy'' from ``neutral.'' Pierre Ferragu at Sanford Bernstein increased his rating to ``outperform'' from ``underperform.''
Hennes & Mauritz AB climbed 2.2 percent to 258.50 kronor. Europe's second-largest clothing retailer said same-store sales fell 2 percent last month. That beat the average analyst estimate in a SME Direkt survey for a 2.6 percent decline. Total revenue rose 9 percent, excluding currency swings.
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
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