European Stock-Index Futures Decline; Rio Tinto, Shell May Drop

By Adam Haigh

Dec. 2 (Bloomberg) -- European stock-index futures dropped, following declines in the U.S. and Asia, as lower commodity prices deepened concern that slowing demand will crimp earnings. U.S. index futures were little changed.

Rio Tinto Group, the world’s third-biggest mining company, sank 8.7 percent in Australia as copper slipped for the fourth day. Royal Dutch Shell Plc and BP Plc, Europe’s two largest oil producers, may track a retreat in their U.S.-traded securities as crude slumped to the lowest in more than three years. Bulgari SpA will probably decrease after Goldman Sachs Group Inc. recommended selling shares in the jeweler.

“There is a latent fear in this market that we have another significant rout to come,” said Manus Cranny, a London- based equity market analyst at MF Global. “The cauldron of discontent is really starting to take” a grip, he said.

Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, lost 33, or 1.5 percent, to 2,249 at 7:35 a.m. in London. The U.K.’s FTSE 100 Index is set to open 69 points lower, according to IG Markets. Standard & Poor’s 500 Index futures added 0.1 percent.

The S&P 500 slid 8.9 percent yesterday, as financial shares tumbled a record 17 percent. Asian equity markets declined today, led by Japan’s Nikkei 225 Stock Average which lost 4.7 percent, on heightened concern earnings will collapse as manufacturing shrinks and demand for metals falls.

The U.S. economy entered a recession last December, the panel at the National Bureau of Economic Research that dates American business cycles said yesterday. Europe’s economy fell into its first recession in 15 years in the third quarter as the worst financial crisis since the Great Depression raised borrowing costs and eroded confidence.

Deep Recession

JPMorgan Chase & Co. today said we may see a “deep global recession” next year, according to a note by the head of European equity strategy Mislav Matejka.

“With so much gloomy economic news in circulation right now it’s difficult to see how the current mindset can be broken,” said Matt Buckland, a senior trader at spread-betting firm CMC Markets in London.

The European Commission and the European Central Bank are working on state-aid guidelines in a move that would pave the way for approval of France’s 10.5 billion-euro ($13 billion) bank-rescue plan, two officials familiar with the matter said.

Rio Tinto lost 8.7 percent in Australia. Copper for February delivery in Shanghai slid as much as 2.6 percent on signs consumption is weakening.

American depositary receipts of Shell, Europe’s largest oil producer, slid 1.6 percent below the closing price in London yesterday. ADRs of BP, the region’s second biggest, also dropped 1.6 percent.

Oil Drops

Oil fell on signs that the economy in the U.S., the world’s largest energy consumer, is in a more severe slowdown than expected. Crude for January delivery dropped as much as 3.5 percent in after-hours in New York.

The more than 60 percent slide in prices for commodities including oil and copper from July records is causing resource companies to cancel or delay expansion projects.

In Australia, Shell and Anglo American Plc postponed plans to develop a A$5 billion ($3.2 billion) coal-to-liquids project.

Bulgari may decline. Goldman Sachs added the shares to its “conviction sell,” as it lowered the price estimate for the stocks 38 percent to 3.9 euros. The world’s third-largest jeweler is expected to underperform its peers in a “more challenging market,” according to a note to clients today. The stock was previosuly rated “neutral.”

Tesco Plc may rise after the U.K.’s biggest supermarket company reported a 2 percent gain in same-store sales excluding gas, beating analyst estimates of a 1.6 percent climb. Tesco also said it plans to reduce capital expenditure next year to below 4 billion pounds ($5.95 million).

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net