By Adam Haigh
Jan. 8 (Bloomberg) -- Shares in Europe and Asia fell on speculation earnings will deteriorate as the global economic slump reduces demand for commodities. U.S. index futures drifted between gains and losses.
BHP Billiton Ltd. and Rio Tinto Group dropped at least 2 percent as copper retreated in London. Lenovo Group Ltd. had its steepest decline in a decade after the fourth-biggest personal computer maker predicted a quarterly loss. Infineon Technologies AG, Europe’s second-largest chipmaker, slumped 9.2 percent.
The MSCI World Index fell 0.8 percent to 932.13 at 9:44 a.m. in London. Weaker-than-estimated sales at Intel Corp. and Lenovo’s forecast this week disappointed investors as Citigroup Inc. estimated the downturn in earnings is only a quarter of the way into a 50 percent slide from the peak.
“We call it the hard slog,” said Kevin Lecocq, chief investment officer at Barclays Wealth, which manages about $215 billion in assets. “You are going to see horrible numbers until some of the fiscal stimuli start to impact the real economy, which will probably come in the end of 2009 and into 2010,” he told Bloomberg Television.
The MSCI World has tumbled 41 percent since the start of last year as more than $1 trillion in losses at financial companies eroded profits and the U.S., Europe and Japan fell into the first simultaneous recessions since World War II.
Europe’s Dow Jones Stoxx 600 Index declined for a second day, losing 0.6 percent. The measure had posted its best ever start to a year on speculation efforts by governments and central banks will revive the global economy.
U.K. Interest Rates
The global slowdown may prompt the Bank of England to reduce its key interest rate today to an all-time low of 1.5 percent from 2 percent, according to economists surveyed by Bloomberg. The European Central Bank has reduced its benchmark rate by 1.75 percentage points to 2.5 percent since October.
The MSCI Asia Pacific Index dropped 3.2 percent, the biggest decline since Dec. 12, as Cnooc Ltd. and Macquarie Group Ltd. retreated. Futures on the Standard & Poor’s 500 Index were little changed before a report that may show the number of Americans filing for initial jobless claims rose last week.
Global equities “need to get more of the bad news out of the way before attempting a meaningful recovery,” Citigroup equity strategists led by Robert Buckland wrote in a note to clients dated yesterday. ING Wholesale Banking said stocks in western Europe will make little headway in 2009 and may test fresh lows in the first half of the year.
Profit Decline
The western European companies tracked by Bloomberg that announced results since the Stoxx 600 began its rebound on Nov. 21 posted an average 75 percent decline in profit, with 92 percent missing analysts’ expectations.
BHP, the world’s largest mining company, lost 2.3 percent to 1,303 pence as Rio Tinto, the third-biggest, slid 4.2 percent to 1,736 pence. Copper fell as much as 2.3 percent in London.
Earnings at basic-resource companies in the Stoxx 600 will drop 18 percent this year, according to analysts’ estimates compiled by Bloomberg. That’s the second-steepest decline among 10 industry groups after energy companies, the data show.
Lenovo sank 26 percent to HK$1.91. The company said it expects to post a “material loss” in the quarter ended Dec. 31 and will eliminate about 2,500 jobs, leading to savings of about $300 million in the year ending March 2010.
The outlook from the maker of Thinkpad laptops underscores the challenge facing technology companies after Intel yesterday said fourth-quarter revenue dropped 23 percent and Dell Inc. replaced top executives to revive demand.
Infineon, ASML
Infineon tumbled 9.2 percent to 1.08 euros. ASML Holding NV, Europe’s largest maker of semiconductor equipment, slipped 1.8 percent to 12.815 euros.
Hays Plc dropped 4.6 percent to 73 pence. Britain’s largest recruitment company said net fees fell 10 percent in the quarter ended Dec. 31 as companies stopped hiring full-time staff and the pace of layoffs increased.
In Asia, Cnooc lost 6.7 percent to HK$7.37 after crude sank the most in more than seven years yesterday, plunging 12 percent to $42.63 a barrel in New York on demand concern. Oil added 0.7 percent today.
Macquarie dropped 3.7 percent to A$32.50 as Australia’s biggest securities firm said a “challenging” market is hurting profitability and announced a A$1.5 billion ($1.07 billion) sale of margin loans to a regional lender.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
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