By Adria Cimino
Nov. 19 (Bloomberg) -- Stocks fell in Europe and Asia, led by chemical companies and financial firms, on concern the economic slowdown will cut profits. U.S. futures dropped after consumer prices slid the most on record, heightening the risk of deflation.
BASF SE, the world's largest chemical company, tumbled 17 percent after abandoning its target to match last year's profit. UBS AG slumped 5 percent as Morgan Stanley slashed its estimate for the Swiss bank's earnings by 23 percent, citing the possibility of more writedowns. Sumitomo Mitsui Financial Group Inc., Japan's third-largest bank, tumbled 7.9 percent on plans to raise capital.
The MSCI World Index lost 1 percent to 852.75 at 1:52 p.m. in London, extending this year's drop to 46 percent. More than $31 trillion has been erased from the value of global equities as the financial-market turmoil pushes countries from Europe and the U.K. to the U.S. and Japan into recession.
``We're in an uncertain environment,'' said Julien Quistrebert, an equity analyst at KBL Richelieu Gestion in Paris, which oversees $5.1 billion. ``The question is how long will the recession last and what will be the impact on companies.''
Europe's Dow Jones Stoxx 600 Index fell 2.7 percent. Rio Tinto Group, the world's third-biggest mining company, followed metal prices lower, slipping 3.8 percent.
The MSCI Asia Pacific Index sank 0.9 percent, while Standard & Poor's 500 Index futures lost 2.4 percent.
Deflation Risk
The cost of living in the U.S. plunged 1 percent last month, more than forecast and the most since records began in 1947, as fuel costs plummeted and retailers discounted automobiles and clothing to entice shell-shocked customers.
A recession that may become the worst in decades raises the risk that deflation, or a prolonged decline in prices, will be another hazard facing Federal Reserve Chairman Ben S. Bernanke and President-elect Barack Obama.
European Central Bank President Jean-Claude Trichet in a Sky News Television interview said the world is experiencing its worst financial crisis since the aftermath of World War Two.
Analysts have cut profit estimates for 48 percent of stocks they cover worldwide, the most in at least 15 years, and more downgrades are likely as the economy slows, JPMorgan Chase & Co. said. In Europe, 44 percent were downgraded, the study, which covers data since 1993, said.
U.S. companies reporting earnings this quarter have missed analyst expectations by about 15 percent, according to Bloomberg data. In western Europe, profit has missed estimates by about 8.8 percent, the data show.
BASF, UBS
BASF sank 17 percent to 21.18 euros after abandoning a target to match last year's profit level on slumping demand. The company said it will close 80 plants, according to a DGAP statement.
UBS, the European bank hardest hit by credit losses, tumbled 5 percent to 12.61 francs. Morgan Stanley cut its 2009 earnings estimate for UBS to 1.41 francs per share, from 1.83 francs, citing the possibility of further writedowns and projected wealth management outflows of 77 billion Swiss francs ($64 billion).
The Swiss bank has posted $48.6 billion in credit-related losses and writedowns, according to Bloomberg data. Losses by the world's biggest financial firms have topped $966 billion in the worst financial crisis since the Great Depression.
HSBC Holdings Plc, Europe's biggest bank, lost 4.9 percent to 667.5 pence. The stock was downgraded to ``sell'' at WestLB AG, which cited further deterioration in the global economic outlook and a lower than average Tier 1 capital ratio.
The brokerage reduced its earnings-per-share estimates for HSBC by more than 20 percent for 2008 to 2010.
ING Groep NV tumbled 8.8 percent to 6.50 euros. ING had its price estimate cut by 36 percent at Goldman Sachs Group Inc., which said the Dutch financial-services company faces ``significant headwinds'' in the medium term due to the credit and equity market ``dislocation.''
Sumitomo Mitsui fell 7.9 percent to 314,000 yen on a plan to raise 400 billion yen ($4.1 billion) to replenish capital as Japan's recession drives up bankruptcies.
Mining Stocks
Mining stocks retreated on concern the economic slowdown will hurt demand for metals, sending the Reuters/Jefferies CRB Index of 19 commodities down 0.6 percent.
Rio Tinto decreased 4 percent to 2,370 pence, and BHP Billiton Ltd., the world's largest mining company, declined 3.3 percent to 851 pence.
Gold declined for the second straight day on speculation that the slumping global economy will reduce demand for commodities, eroding the appeal of the precious metal as a hedge against inflation. Copper, nickel and tin fell in London.
British Land Co. slipped 2.9 percent to 527.5 pence. The largest office landlord in London reported a wider second quarter loss after writing down the value of shops and offices by 683 million pounds ($1.02 billion) in the credit crisis.
Lending Freeze
A freeze on bank lending has cut credit to most property borrowers, exacerbating falls in real-estate prices. U.K. commercial values are down 28 percent from the peak in June 2007, according to Investment Property Databank Ltd.
Central banks from London and Frankfurt to Washington and Tokyo have slashed interest rates and pumped funds into the financial system in an effort to unlock credit markets.
Reckitt Benckiser Plc, the world's largest maker of household cleaners, climbed 2.3 percent to 2,748 pence. Citigroup Inc. rated the shares ``buy'' in new coverage, citing ``substantial growth opportunities'' in consumer health care and ``resilience in developing markets, where Reckitt is well diversified.''
Experian Plc jumped 11 percent to 340.25 pence. The world's largest credit-checking company said first-half profit jumped 15 percent as it cut costs to offset declining demand for credit services in the U.S. and U.K.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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