Europe, Asia Stocks Fall on Earnings Concern; U.S. Futures Drop

By Michael Patterson

Dec. 4 (Bloomberg) -- Stocks in Europe and Asia fell after a $2.5 billion loss at Credit Suisse Group AG and disappointing forecasts from technology companies deepened concern the economic slump will curb earnings, overshadowing speculation central banks will cut interest rates. U.S. index futures retreated.

Credit Suisse, Switzerland’s second-biggest bank, dropped 5.8 percent after its securities unit had a “significant” pretax loss in October and November. Royal Philips Electronics NV slumped 3.2 percent after Europe’s largest maker of consumer electronics said it won’t meet a goal of doubling earnings by 2010. Adobe Systems Inc., the biggest maker of graphics software, declined 6.5 percent on a sales forecast that trailed estimates.

Europe’s Dow Jones Stoxx 600 Index sank 0.8 percent to 196.68 at 8:05 a.m. in London. Economists forecast the Bank of England and European Central Bank will announce reductions in their benchmark rates today to revive economic growth.

“The ongoing weakness in commodity prices will certainly end up weighing on these sectors,” said Matt Buckland, a senior trader at spread-betting firm CMC Markets in London. “Rate decisions from both the U.K. and euro zone will be closely watched. Failure to deliver could end up weighing on equities.”

The MSCI Asia Pacific Index retreated 0.8 percent as tiremaker Bridgestone Corp. tumbled on speculation U.S. automakers General Motors Corp. and Chrysler LLC may enter a pre-arranged bankruptcy. Futures on the Standard & Poor’s 500 Index expiring in December dropped 1.3 percent as GM lost 3.1 percent.

Rate Outlook

Investors are betting the ECB will lower the benchmark lending rate by at least 75 basis points to 2.5 percent, the biggest single reduction ever, Eonia forward contracts show. Economists are divided, with 35 of 56 surveyed by Bloomberg News predicting a 50-point reduction and 21 forecasting a move of 75 points or more.

Economists predict the Bank of England will cut its key rate by 100 basis points to 2 percent.

The MSCI World Index of 23 developed markets has tumbled 46 percent in 2008 as the collapse of the U.S. mortgage market froze credit and pushed economies from the U.S. to the U.K and Germany into recession. More than $30 trillion has been erased from the value of global equities in 2008.

Credit Suisse said it will cut 5,300 jobs, or 11 percent of its workforce, after losses of 3 billion francs in the first two months of this quarter. The reductions will be primarily in the investment bank and help save 2 billion francs in costs, the bank said in an e-mailed statement. The shares fell 5.8 percent to 26.1 francs.

Disappointing Forecasts

Philips said it doesn’t expect to meet its profit goal because the weakening economy is hurting demand for consumer and automotive products. The company will write down its stakes in LG Display Co., the world’s second-largest maker of liquid- crystal displays, and NXP BV, Europe’s third-biggest maker of semiconductors, by 1.1 billion euros ($1.39 billion) this quarter. Philips shares lost 3.2 percent to 12.78 euros.

Adobe dropped 6.5 percent to $21.07 in German trading. Sales in the first quarter ending in February probably will fall to between $800 million and $850 million. That missed the $928.8 million average of estimates compiled by Bloomberg.

Analysts have slashed earnings estimates this year. Profit for companies in the Stoxx 600 will slide 13 percent in 2008, compared with 11 percent growth forecast at the start of the year, according to estimates compiled by Bloomberg.

Since Oct. 7, quarterly earnings for the 330 companies in the Stoxx 600 that reported results declined 14 percent on average, trailing expectations by 6.2 percent, Bloomberg data show.

Last Resort

GM and Chrysler executives are considering accepting a pre- arranged bankruptcy as the last-resort price of getting a multibillion-dollar government bailout, said a person familiar with internal discussions.

Auto executives have warned that bankruptcy would lead to liquidation as customers abandoned the companies. In response, staff for three members of Congress have asked restructuring experts if a pre-arranged bankruptcy -- negotiated with workers, creditors and lenders -- could be used to reorganize the industry without liquidation, a person familiar with that matter said.

GM dropped 3.1 percent to $4.75 in German trading. Bridgestone, the world’s largest tiremaker by sales, lost 9.2 percent to 1,356 yen.

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