By Adria Cimino
Jan. 29 (Bloomberg) -- European stocks declined for the first time in four days and U.S. index futures fell on concern the deepening global economic slump will erode profits. Shares in Asia advanced.
Xstrata Plc and Cookson Group Plc tumbled at least 6 percent after the companies said they will raise capital. BHP Billiton Ltd. dropped 2.7 percent on lower metal prices. AstraZeneca Plc sank 4.2 percent as the drugmaker predicted no sales growth this year. Qualcomm Inc. lost 5.7 percent in German trading after cutting its annual revenue forecast and saying first-quarter profit slid 56 percent.
Europe’s Dow Jones Stoxx 600 Index retreated 1.6 percent to 191.21 at 1:35 p.m. in London, bringing the decline in January to 3.6 percent. Futures on the Standard & Poor’s 500 Index fell 1.2 percent as reports showed a bigger-than-estimated drop in durable goods orders and more jobless claims. Federal Reserve officials yesterday warned of a prolonged global economic slowdown.
“We’re realizing that a recession that is close to a depression is driving earnings lower,” said Romain Boscher, head of equities at Groupama Asset Management in Paris, which oversees about $17 billion in stocks. “Stocks will have trouble rebounding with the headwind of bad news.”
The Stoxx 600 sank 46 percent last year as financial firms racked up more than $1 trillion in credit-related losses and writedowns and the U.S., Japan and Europe entered the first simultaneous recessions since World War II.
Earnings Estimates
Analysts have cut their earnings estimates, now projecting a 2.2 percent average drop for companies in the Stoxx 600 and a 5.4 percent slide in the S&P 500 in 2009, Bloomberg data show.
The MSCI Asia Pacific Index rose 1.5 percent today as Westpac Banking Corp. rallied on lower interest rates in New Zealand. The yen climbed from a one-week low against the dollar.
For the first time during the credit crisis, the Federal Open Market Committee’s statement yesterday indicated concern about the worldwide economy weakening “significantly,” with “some risk” that inflation would remain below ideal rates. The Fed signaled it’s moving closer to buying long-term Treasuries and expanding its $600 billion program to buy home-finance debt.
Treasuries declined, heading for a monthly loss, as the U.S. prepared a second record note sale this week and the U.S. House passed President Barack Obama’s economic plan.
Orders for U.S. durable goods dropped 2.6 percent in December, more than economists forecast. Weekly initial jobless claims also exceeded estimates.
European Central Bank
National benchmark indexes decreased in all of the 18 western European markets except Luxemburg and Portugal. The U.K.’s FTSE 100 slid 2.1 percent as Rio Tinto Group and London Stock Exchange Group Plc fell. France’s CAC 40 retreated 1.4 percent. Germany’s DAX slipped 1.3 percent as unemployment in the country rose almost twice as much as forecast in January.
European Central Bank President Jean-Claude Trichet said in a Bloomberg Television interview in Davos, Switzerland that the bank’s next “important” meeting will be in March, suggesting policy makers will avoid the interest-rate cut some investors expect next week.
Xstrata sank 6.8 percent to 580.5 pence. The mining company plans to raise 4.1 billion pounds ($5.8 billion) in a two-for-one rights offer to pay down debt and buy Colombian coal assets from Glencore International AG, its largest shareholder.
Commodity producers also declined as copper, nickel and tin fell in London. BHP, the world’s biggest mining company, lost 2.7 percent to 1,286 pence. Rio Tinto, the third-largest, slid 4.8 percent to 1,538 pence.
Cookson, AstraZeneca
Copper may slump by more than half this year as the global recession cuts demand, according to MF Global Ltd., one of 12 companies that trade on the floor of the London Metal Exchange.
Cookson retreated 13 percent to 74.25 pence. The biggest maker of ceramic linings for metal smelters plans to raise about 240 million pounds in a share sale to reduce debt and remain within banking terms.
AstraZeneca sank 4.2 percent to 2,740 pence as the U.K.’s second-largest drugmaker said profit fell 1.4 percent in the fourth quarter to $1.25 billion.
Qualcomm slid 5.7 percent to $34.73 in Germany. The world’s biggest maker of mobile-phone chips reduced its annual sales forecast as the recession curbed growth and hurt its investments. Net income dropped to $341 million from $767 million a year earlier, the company said yesterday.
London Stock Exchange dropped 5.1 percent to 484.25 pence. Europe’s third-largest securities bourse was downgraded to “sell” from “hold” at Citigroup Inc., citing a weak trading volume outlook for the start of the year.
Deutsche Boerse, Thomson
Deutsche Boerse AG retreated 3.1 percent to 40.54 euros as the operator of the Frankfurt bourse had its share-price estimate cut 37 percent to 54 euros by the brokerage.
Thomson SA tumbled 19 percent to 1.06 euros. The unprofitable French maker of television set-top boxes will sell assets and plans discussions with creditors and potential investors as part of a reorganization to reduce its debt.
Nobel Biocare Holding AG slipped 3.8 percent to 18.31 Swiss francs after Goldman Sachs Group Inc. downgraded the shares to “sell” from “neutral,” saying the market is underestimating the earnings impact of a slowdown in sales growth.
Swatch Group AG dropped 3.1 percent to 131.2 francs. The world’s largest watchmaker said second-half revenue fell 6.3 percent to 2.85 billion francs ($2.5 billion), missing the 3.03 billion-francs average of 16 analysts’ estimates, as customers cut spending on mid-range brands such as Tissot and Certina.
New Zealand’s Westpac Banking jumped 6.3 percent to NZ$20.30. Commonwealth Bank of Australia, which gets 14 percent of its sales from New Zealand, gained 2.2 percent to A$26.90.
The Reserve Bank of New Zealand today lowered the benchmark interest rate by 1.5 percentage points to 3.5 percent and said there’s room for further reductions.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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