By Michael Patterson
Dec. 1 (Bloomberg) -- Stocks in Europe and Asia dropped, sending the MSCI World Index to its first retreat in seven days, as record declines in European and Chinese manufacturing signaled the global economic slump is worsening. U.S. index futures fell.
ArcelorMittal, the world’s biggest steelmaker, decreased 7.8 percent. Barclays Plc, the U.K.’s second-largest bank, slipped 4.5 percent as an industry report showed U.K. house prices sank to the lowest level since January 2006. Mitsubishi Estate Co., Japan’s second-biggest property developer, lost 5.6 percent after the failure of homebuilder Morimoto Co.
“The situation is bad and it’s getting worse” for the global economy, Roger Nightingale, who helps oversee about $1.1 billion as a London-based strategist at Pointon York Ltd., said in an interview on Bloomberg Television. “The good news is that the authorities seem to have noticed.”
The MSCI World declined 1.1 percent to 883.58 at 12:26 p.m. in London. The benchmark index for 23 developed markets had its biggest advance on record last week as investors speculated stimulus packages and interest-rate cuts in Europe, the U.S. and China will help shore up the economy and stabilize markets.
Europe’s Dow Jones Stoxx 600 Index lost 2.9 percent today and the MSCI Asia Pacific Index slipped 0.1 percent. Standard & Poor’s 500 Index futures dropped 2.3 percent before a report that may show U.S. manufacturing contracted at the fastest pace in 26 years. General Electric Co., the world’s biggest maker of power plant turbines, fell 1.1 percent in early trading.
Russia’s Micex index led declines in the world’s 20 biggest markets, retreating 4.2 percent. The nation’s manufacturing shrank more in November than during the 1998 financial collapse as output and new orders fell to record lows and companies cut jobs, VTB Bank Europe said today.
National Markets
National benchmark indexes decreased in all 18 western European markets except Ireland. The FTSE 100 dropped 2.5 percent as BP Plc declined with oil prices. Germany’s DAX lost 3.2 percent after ThyssenKrupp AG dropped for the first time in seven days. France’s CAC 40 slipped 2.6 percent.
ArcelorMittal, the world’s biggest steelmaker, sank 7.8 percent to 17.27 euros following a 34 percent gain last week. ThyssenKrupp, Germany’s largest steelmaker, retreated 4.8 percent to 15.20 euros.
China’s Purchasing Managers’ Index fell to a seasonally adjusted 38.8 in November from 44.6 in October, the China Federation of Logistics and Purchasing said today in an e-mailed statement. A second PMI, released by CLSA Asia-Pacific Markets, also showed a record contraction.
Record Low
A European manufacturing index based on a survey of purchasing managers by Markit Economics dropped to 35.6 from 41.1 in October, remaining below the expansion-threshold of 50 for a sixth month. That’s the lowest since the survey began in 1998 and less than an initial estimate of 36.2 published on Nov. 21.
U.K. manufacturing shrank at the fastest pace in at least 16 years in November, a separate report showed.
“Investors still think the earnings outlook is going to get worse before it gets better,” said Mark Bon, a London-based fund manager who helps oversee about $750 million at Canada Life Ltd. “There is little short-term prospect for a turnaround” in the economy, he said.
Barclays dropped 4.5 percent to 161.8 pence following last week’s 27 percent climb. Lloyds TSB, which is buying HBOS Plc to become Britain’s biggest mortgage lender, declined 2.9 percent to 163.2 pence.
The average cost of a home in England and Wales fell 8.1 percent in the past 12 months to 161,400 pounds ($248,000), London-based Hometrack Ltd. said. Values declined 1.1 percent on the month, compared with a 1.3 percent drop in October. U.K. mortgage approvals matched the lowest since at least 1999 in October, the Bank of England said.
Money Rates Rise
The London interbank offered rate, or Libor, that banks say they charge each other for three-month loans in dollars rose for a third day. The rate climbed less than half a basis point to 2.22 percent, according to British Bankers’ Association data. The overnight rate dropped seven basis points to 1.09 percent, nine basis points above the Federal Reserve’s target.
Asia money-market rates rose, with the Tokyo three-month interbank offered rate, or Tibor, extending the longest stretch of gains in more than a year. Hong Kong’s equivalent rate, Hibor, had the steepest increase since Nov. 13.
Mitsubishi Estate, which owns office buildings in Tokyo’s main business district, fell 5.6 percent to 1,341 yen.
Morimoto filed for protection from creditors on Nov. 28 with 162 billion yen ($1.7 billion) of debt, nine months after its initial public offering. The bankruptcy, Japan’s second- biggest this year, drove corporate failures of listed companies to the highest level since World War II, according to research company Teikoku Databank Ltd.
New Star Tumbles
New Star Asset Management Group Ltd., the U.K. fund company founded by John Duffield, tumbled 59 percent to 5.8 pence after market authorities rejected its request to temporarily suspend the stock. New Star was seeking the suspension pending the conclusion of “advanced and constructive talks” with lenders, it said in a statement.
BP, Europe’s second-largest oil company, declined 2.1 percent to 515.5 pence. Eni SpA, Italy’s biggest oil company, dropped 3.2 percent to 17.16 euros.
Crude oil for January delivery fell as much as 4.3 percent to $52.08 a barrel in New York after the Organization of Petroleum Exporting Countries deferred for another two weeks a decision to reduce output.
Slowing global growth means demand will be “much lower” than expected a month ago, OPEC said after the group’s Nov. 29 meeting in Cairo. Another cut on Dec. 17 may not be needed if member states enacted 80 percent of the 1.5 million barrel-a-day reduction agreed in October, Al Hayat reported, citing Saudi Arabia’s Oil Minister Ali al-Naimi.
Economy Watch
October retail sales in Germany, adjusted for inflation and seasonal swings, dropped 1.6 percent from September, when they declined a revised 1 percent, the Federal Statistics Office in Wiesbaden said today. Economists forecast a gain of 0.5 percent, the median of 34 estimates in a Bloomberg News survey showed.
European Central Bank policy makers, convening in Brussels on Dec. 4, will probably cut their benchmark lending rate by 50 basis points to 2.75 percent, the median of 53 economist forecasts in a Bloomberg News survey shows.
To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.
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