By Adria Cimino
Dec. 22 (Bloomberg) -- Stocks in Europe and Asia declined, extending the MSCI World Index’s worst year on record, as concern mounted the deteriorating global economy will curb earnings. U.S. index futures advanced.
Daimler AG and Bayerische Motoren Werke AG sank more than 3 percent after Japan’s Toyota Motor Corp. forecast its first operating loss in 71 years on plunging North American and European car sales and a surging yen. In Asia, DBS Group Holdings Ltd. slumped 4.9 percent after the bank sought capital in a rights offering.
Europe’s Dow Jones Stoxx 600 Index dropped for a fourth day, retreating 0.5 percent to 195.53 at 1:23 p.m. in London. The MSCI Asia Pacific Index decreased 0.6 percent. Standard & Poor’s 500 Index futures expiring in March added 0.6 percent.
“The economic slowdown is being confirmed and it isn’t reassuring,” said Kilian de Kertanguy, a fund manager at Cholet- Dupont Gestion in Paris, which oversees about $2.3 billion. “Companies most touched by economic activity are suffering. The auto sector is the sword of Damocles for the stock market.”
The MSCI World Index has slumped 43 percent this year as credit-related losses and writedowns at financial firms topped $1 trillion and the U.S., Europe and Japan entered the first simultaneous recessions since World War II. The drop has left the gauge of 23 developed markets valued at 11.6 times the reported earnings of its 1,694 companies. That compares with an average ratio of 26.5 this decade, data compiled by Bloomberg show.
Analysts have slashed their earnings forecasts, predicting a 16 percent drop in full-year profits at Stoxx 600 companies, compared with 11 percent growth estimated at the start of the year. Earnings in 2009 are expected to rise 0.1 percent, according to data compiled by Bloomberg.
Stimulus Plans
Stocks pared declines after China lowered interest rates for the fifth time in three months to support the world’s fourth- biggest economy.
President-elect Barack Obama is expanding his stimulus package with a goal of creating or saving 3 million jobs over two years, a transition aide said Dec. 20. That’s revised from 2.5 million jobs he previously announced.
The target came at the suggestion of Christina Romer, Obama’s pick to head the Council of Economic Advisers, the aide said, speaking on condition of anonymity. Romer said the short, medium and long-term economic forecasts have worsened since Obama outlined the plan Nov. 22, according to the aide.
Toyota Forecast
Daimler, the world’s largest truckmaker, dropped 3.4 percent to 25.16 euros. BMW, the biggest maker of luxury cars, fell 3.1 percent to 21.22 euros. Volkswagen AG, Europe’s largest carmaker, slid 8 percent to 263 euros.
Toyota, the world’s second-biggest carmaker, said its loss in the year ending March will likely total 150 billion yen ($1.7 billion), compared with a previous forecast for a 600 billion yen operating profit. Toyota cut its net income forecast 91 percent to 50 billion yen.
General Motors Corp., the largest U.S. automaker, dropped 6.7 percent to $4.19 in German trading. President George W. Bush announced last week that GM and Chrysler LLC will get $13.4 billion in emergency government loans in exchange for substantially restructuring their businesses.
The cost of letting carmakers fail would lead to a 1 percent reduction in U.S. economic growth and mean about 1.1 million workers would lose their jobs, including those in the auto-supply business and among dealers, the White House said.
‘In Difficulty’
“Carmakers are in difficulty,” Clemence Bounaix, who helps oversee about $5.6 billion as fund manager at KBL Richelieu Gestion, told Bloomberg Television. “The situation remains tense. There’s a systemic effect on the stock market.”
European industrial orders fell by the most on record in October as the global recession deepened, eroding demand for machinery and equipment. Orders in the 15-nation euro area plunged 15.1 percent from the year-earlier month, the most since the euro was introduced in 1999, the European Union statistics office in Luxembourg said today.
DBS Group slumped 4.9 percent to S$9.37 as Southeast Asia’s largest bank sought about $2.8 billion in a rights offering.
Financial companies in the MSCI World have slumped 56 percent this year following the collapse of the U.S. subprime- mortgage market, the worst performance among 10 industry groups.
Danske Bank A/S, the second-biggest Nordic bank, dropped 3.3 percent to 51 kroner today. The Danish government will inject 100 billion kroner ($18.7 billion) into the banking system to help lenders overcome the credit crisis, Jyllands-Posten said, citing Finance Minister Lars Loekke Rasmussen.
Irish Banks
Allied Irish Banks Plc climbed 26 percent to 2.08 euros. Ireland’s biggest lender by market value will receive 2 billion euros from the government, the finance ministry in Dublin said.
Anglo Irish Bank Corp., the country’s third-largest lender by assets, will get 1.5 billion euros and the government will control shares with 75 percent of Anglo Irish’ voting rights, the finance ministry said. Bank of Ireland Plc, the biggest bank by assets, will receive 2 billion euros from the government.
Anglo Irish slipped 23 percent to 27 cents, while Bank of Ireland surged 44 percent to 97 cents.
Health-care and telecommunications companies were the only two industry groups to gain in the Stoxx 600. Roche Holding AG, the world’s biggest maker of tumor drugs, added 2.1 percent to 163.3 Swiss francs. Vodafone Group Plc, the largest mobile-phone company, gained 2.8 percent to 133.6 pence.
“There’s some window dressing, getting into safer stocks for clients,” Cholet-Dupont’s de Kertanguy said.
Infineon Climbs
Infineon Technologies AG, Europe’s second-largest chipmaker, rallied 8.3 percent to 71 cents. The company’s Qimonda AG unit will get a loan of 325 million euros ($452 million) from the German state of Saxony, Infineon and a Portuguese bank as part of a rescue package for the distressed German memory-chip maker.
Deutsche Bank AG analysts upgraded Infineon shares to “hold” from “sell.”
Measures of volatility have failed to signal the scope of declines in equities this year, spurring some investors to start to abandon the so-called VIX Index as a forecasting tool for stocks. The Chicago Board Options Exchange Volatility Index flashed “buy” signals for the S&P 500 during October’s 17 percent drop, the biggest since the stock market crashed in 1987. The VIX also lost 44 percent since Nov. 20, a bearish signal, even as the S&P 500 rose 18 percent.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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