By Adria Cimino
Nov. 6 (Bloomberg) -- Stocks fell in Europe and Asia and U.S. index futures dropped as disappointing results from Toyota Motor Corp., Cisco Systems Inc. and Adidas AG deepened concern the economic slump will stifle profit growth.
The worst banking crisis in almost a century pushed the Bank of England to slash its key interest rate 1.5 percentage points, while the European Central Bank cut its benchmark rate by half a point. Toyota, the world's second-largest automaker, slumped 4.2 percent in Germany after forecasting the biggest drop in profit in at least 18 years. Cisco sank 5.8 percent on its prediction of the first revenue decline in five years. Adidas tumbled 6.7 percent as the sporting-goods maker reported worse-than-expected profit.
``We've had nothing but profit warnings,'' said Romain Boscher, a fund manager at Groupama Asset Management in Paris, which oversees $17 billion in stocks. ``There's a headwind and a stream of bad news. The recession is here. The question is, `How long will it last and how profound will it be?' We're entering the unknown.''
The MSCI World Index lost 2.4 percent to 959.52 at 1:33 p.m. in London, extending this year's decline to 40 percent. More than $27 trillion has been erased from the value of global equity markets as credit losses and writedowns topped $690 billion in the worst financial crisis since the Great Depression.
Trichet
Europe's Dow Jones Stoxx 600 Index fell 3.1 percent, with all 19 industry groups declining except for health-care stocks.
News Corp. slumped 21 percent in Australia, the most since 1987, after saying net income will fall. Cathay Pacific Airways Ltd. sank 14 percent in Hong Kong after saying this year's earnings will be hurt by slowing demand and fuel-hedging losses. The MSCI Asia Pacific Index slid 6 percent, dropping for the first time in four days.
Standard & Poor's 500 Index futures slipped 1.9 percent. U.S. stocks yesterday had their biggest plunge following a presidential election as reports on jobs and service industries stoked concern the economy will worsen even as President-elect Barack Obama tries to stimulate growth.
``The effect of Obama's election is erased today by the reality of the economy, which isn't good,'' said Clemence Bounaix, a fund manager at KBL Richelieu Gestion, which oversees $5.2 billion. ``Markets remain cautious.''
Lost Jobs
The Labor Department said 481,000 workers filed initial claims in the week ended Nov. 1, exceeding the 477,000 projected by economists surveyed by Bloomberg News. The number of people staying on benefit rolls was the most since February 1983. Tomorrow's payrolls report is projected to show the economy lost an additional 200,000 jobs in October, bringing the total decline to almost 1 million so far this year, while the unemployment rate jumped to the highest level in more than five years.
Earnings for the 956 companies in western Europe that reported results since Oct. 7 declined 6.7 percent on average, trailing expectations by 5.4 percent, Bloomberg data show. Profits for the 392 companies in the S&P 500 that have reported, including Boeing Co. and AT&T Inc., have shrunk 7.2 percent, while beating predictions by 1.6 percent, the data show.
Companies in the S&P 500 Index may see fourth-quarter earnings advance 15 percent, down from 42 percent projected at the end of August, according to a Bloomberg survey of analysts' estimates. Profits in 2009 may grow 13 percent, analysts say now, compared with the 24 percent predicted two months ago.
Toyota dropped 9.2 percent to 3,450.44 yen in Germany. The company forecast lower profit as a global slump cripples auto demand.
Cisco, Ambac
Cisco, the top maker of networking equipment, fell 5.5 percent to $16.44 after predicting the first revenue decline in five years because of the financial crisis.
Ambac Financial Group Inc. tumbled 13 percent to $1.75 in Germany after its bond insurance rating was cut four levels by Moody's Investors Service, forcing the company to post collateral and causing a cash shortfall of about $3 billion at its investment unit.
Central banks from the U.S. and Japan to Frankfurt and London lowered borrowing costs to revive economic growth and injected cash to unlock credit markets.
Adidas, the world's second-largest sporting-goods maker, fell 7.7 percent to 27.19 euros after reporting third-quarter profit of 302 million euros ($388 million). That missed the 320.5 million-euro estimate in a Bloomberg survey of five analysts.
Missing Estimates
Hermes International SCA, the French maker of Birkin handbags, sank 2.3 percent to 99.06 euros. Revenue rose to 410.5 million euros from 395 million euros a year earlier, just below the 410.8 million-euro median estimate of analysts surveyed by Bloomberg. Growth was about a third of the prior quarter's 12 percent increase.
Axa SA dropped 5.5 percent to 15.76 euros. Europe's largest insurer had a 3.4 percent decline to 20.14 billion euros in third-quarter revenue on lower sales of life and savings products in the U.S. and U.K. That compares with the 20.2 billion-euro estimate of eight analysts surveyed by Bloomberg.
Man Group Plc tumbled 36 percent to 252 pence. The largest publicly traded hedge-fund manager said fiscal first-half profit declined 25 percent after ``extreme moves'' in markets reduced assets under management. Net income from continuing operations for the six months ended Sept. 30 fell to $507 million, or 28.8 cents a share. Analysts surveyed by Bloomberg expected earnings of 31 cents a share.
Total SA, Europe's biggest oil refiner, dropped 3 percent to 41.45 euros. Royal Dutch Shell Plc, the region's biggest energy company, sank 3.7 percent to 1,709 pence.
Oil, Metals Retreat
Oil fell, extending yesterday's more than 7 percent loss, on signs of slowing fuel demand after a U.S. Energy Department report showed an unexpected increase in gasoline inventories. Crude for December delivery declined as much as 3.1 percent to $63.25 a barrel in New York.
Mining shares retreated as the price of copper fell. BHP Billiton Ltd., the world's largest mining company, sank 9.3 percent to 1,034 pence. Anglo American Plc, the fourth-biggest diversified mining company, tumbled 9.3 percent to 1,413 pence.
Copper fell for a second day in London on speculation that a deepening economic slump will reduce global demand for metals. Aluminum and nickel declined.
The Stoxx 600 is valued at 9.4 times reported earnings of the companies in the index, below the average over the past four years of 14 times profit. The gauge traded at 7.9 times earnings on Oct. 27, the lowest since at least January 2002.
The S&P 500 trades at 20.8 times earnings, up from a low of 17.2 on Oct. 10. The MSCI World is valued at 12.3 times profit, up from 10.5 on Oct. 27.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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