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 global economic slump is deepening. Asian shares gained.
Xstrata Plc and Cookson Group Plc tumbled at least 10 percent after the companies said they will raise capital. BHP Billiton Ltd. dropped 5 percent on lower metal prices. London Stock Exchange Group Plc sank 6.7 percent as Citigroup Inc. advised selling the shares. Caterpillar Inc., the largest maker of construction equipment, slipped 1.5 percent in German trading.
Europe’s Dow Jones Stoxx 600 Index retreated 1.8 percent to 190.92 at 9:39 a.m. in London, bringing the decline in January to 3.8 percent. Futures on the Standard & Poor’s 500 Index fell 1.1 percent before reports that may show orders for durable goods dropped for the fourth time in five months and sales of new houses slid to a 26-year low. 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 slumped 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.
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.
Asian Shares
The MSCI Asia Pacific Index rose 1.2 percent 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.
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.
Metal Prices
Xstrata sank 10 percent to 560.5 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 declined as copper, lead, nickel and tin fell in London. BHP, the world’s biggest mining company, lost 5 percent to 1,256 pence. Rio Tinto Group, the third-largest, slid 6.2 percent to 1,515 pence.
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 11 percent to 75.25 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.
Stock Exchanges
European stock exchanges slipped after Citigroup cut its recommendations, citing a weak trading volume outlook for the start of the year.
London Stock Exchange dropped 6.7 percent to 476 pence. Europe’s third-largest securities bourse was downgraded to “sell” from “hold,” while Bolsas y Mercados Espanoles was lowered to “sell” from “buy.” The operator of the Spanish stock exchange fell 1.5 percent to 17.84 euros.
Deutsche Boerse AG retreated 4.5 percent to 39.96 euros. The operator of the Frankfurt bourse had its share-price estimate cut 37 percent to 54 euros.
Caterpillar slipped 1.5 percent to $32.49 in German trading.
U.S. bookings for goods meant to last several years dropped 2 percent after falling 1.5 percent in November, according to the median estimate in a Bloomberg News survey before an economic report today. Builders probably sold 397,000 homes at an annual pace, the fewest since 1982.
Thomson SA tumbled 16 percent to 1.09 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.
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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