By Alexis Xydias and Sarah Jones
Jan. 12 (Bloomberg) -- Stocks in Europe and Asia fell, sending the MSCI World Index lower for a fourth day, on concern the global recession is snuffing out profit growth and curbing demand for commodities. U.S. index futures were little changed.
STMicroelectronics NV declined for a third day after UBS AG advised selling shares of Europe’s largest computer-chip maker. UBS slid the most in a month after SonntagsZeitung said the Swiss bank will post an 8 billion-franc ($7.2 billion) loss for the fourth quarter. PetroChina Co. retreated 3.9 percent as crude slumped for a fifth day.
The MSCI World Index fell 0.5 percent to 917.61 at 12:34 p.m. in London. The index of 23 developed nations has lost 3.4 percent in the past four days as companies from Alcoa Inc. to Intel Corp. spurred concern the profit outlook is worsening, while the unemployment rate in the U.S. climbed to the highest in almost 16 years.
“It will be a rather lackluster earnings season,” said Christian Gattiker, Zurich-based head of equity research and strategy at Bank Julius Baer & Co., which oversees about $307.6 billion. “If you look at economic data in the fourth quarter then there is not much indication of any positive surprises, especially if you look at some of the pre-announcements of some of the big ones like Alcoa and the Intel last week,” he said in a Bloomberg Television interview.
Campaign Promises
Futures on the Standard & Poor’s 500 Index fell less than 0.1 percent. President-elect Barack Obama said in an ABC interview that reviving the economy will require scaling back on campaign promises and personal sacrifice from all Americans.
Europe’s Dow Jones Stoxx 600 Index fell 0.9 percent as European Aeronautic, Defence & Space Co. and Alfa Laval AB declined. The MSCI AC Asia Pacific excluding Japan Index slid 3.1 percent.
The Stoxx 600 has slumped 44 percent since the start of last year as $1 trillion in losses at financial companies eroded profits and sent Europe, the U.S. and Japan into the first simultaneous recessions since World War II.
The International Monetary Fund’s Managing Director Dominique Strauss-Kahn said in a Jan. 9 interview that governments in Western Europe are “behind the curve” in implementing stimulus packages and are “underestimating the needs.” He said the full impact of the slump hasn’t hit the region, where “shops are still full.”
Earnings Season
The European companies tracked by Bloomberg that announced earnings since the MSCI World began to rebound from its 2008 low in November posted a 73 percent decline in average profit, missing analysts’ estimates by 77 percent. American companies have posted a 54 percent drop in earnings, trailing forecasts by 44 percent.
Alcoa will unofficially kick off the earnings reporting season in the U.S. today as the first Dow Jones Industrial Average company to report results. The largest U.S. aluminum producer said last week it will reduce its global workforce by 13,500 and cut production by 135,000 metric tons.
STMicroelectronics slid 4.2 percent to 4.73 euros. The company was cut to “sell” from “neutral” by UBS, which said “there is a risk of revenues coming in lower than revised guidance.”
UBS fell 5.3 percent to 15.99 Swiss francs. The bank may post an 8 billion-franc loss for the final quarter of 2008, SonntagsZeitung reported yesterday, without saying where it got the information. Such a result would take the bank’s full-year deficit to more than 20 billion francs, making it the biggest Swiss corporate loss, the Zurich-based newspaper wrote. UBS spokeswoman Rebeca Garcia declined to comment on the report.
‘Investors’ Tension’
“We’ve had economic data which has driven the stock market and now we’ve arrived at a point at which profits may reflect the slowdown,” said Alexandre Iatrides, a fund manager at KBL Richelieu, which oversees $5.3 billion in Paris. “Earnings will set the tone for stocks. That explains investors’ tension.”
Oil producers in Asia slumped as crude fell for a fifth day in New York, extending last week’s 12 percent drop, on concern demand will decline more rapidly than the Organization of Petroleum Exporting Countries cuts output. Crude for February delivery lost as much as 5.9 percent to $38.43 a barrel in after-hours trading in New York.
PetroChina, China’s largest oil company, lost 4.8 percent to HK$6.68. China Oilfield Services Ltd., a unit of the nation’s largest offshore oil producer, slumped 6.6 percent to HK$5.85.
EADS Falls
EADS dropped 3.4 percent to 13.22 euros after Europe’s biggest aircraft manufacturer said it won’t deliver its A400M military transport until three years after the plane’s first flight. The additional delays to the military transport, already more than a year behind schedule, could mean as much as $6 billion in cost overruns, aerospace analyst Nick Cunningham of Evolution Securities said.
Alfa Laval retreated 1.5 percent to 65.75 kronor. The world’s biggest maker of heat exchangers said it will cut 1,000 jobs in the first half of 2009 as shipmaking customers canceled orders.
The company’s marine and diesel business lost 7 percent of its order backlog to cancellations in the last three months of the year, Alfa Laval said.
The MSCI World Index has rebounded 19 percent since Nov. 20 as investors speculated that Obama will boost the world’s biggest economy with tax cuts. The Federal Reserve has slashed interest rates to as low as zero percent, while the deepening economic contraction in the U.K. spurred the Bank of England last week to reduce borrowing costs to the lowest since the central bank was founded in 1694.
Global Equities Rebound?
Global stocks will gain 25 percent this year as government measures revive the economy and investors move from cash into equities, Nomura Holdings Inc. strategist Ian Scott wrote in a note to clients dated Jan. 9.
Concern that stock losses will deepen remains elevated even after falling from record levels in October and November.
The benchmark index for European options, the VStoxx Index, today climbed 5 percent to 43.37, the biggest advance this year. The gauge, which measures the cost of using options as insurance against declines in the Euro Stoxx 50 Index, surged to 87.51 in October, the highest since at least 2001, data compiled by Bloomberg show.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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