By Adam Haigh
Jan. 21 (Bloomberg) -- Stocks in Europe and Asia fell, sending the MSCI World Index lower for a third straight day, as concern deepened the global recession will erode profits. U.S. index futures advanced.
Barclays Plc and KBC Groep NV tumbled at least 20 percent amid speculation banks may need more capital. ThyssenKrupp AG, Germany’s largest steelmaker, declined 1.7 percent as Morgan Stanley advised clients to sell shares, saying 2009 could be the worst year for the industry on record. China Life Insurance Co., the nation’s biggest insurer, sank 7.5 percent after saying 2008 profit may have fallen by at least 50 percent.
The MSCI World lost 5.15, or 0.6 percent, to 817.46 at 1:33 p.m. in London. The measure has dropped 11 percent this year as companies from Alcoa Inc. to Deutsche Bank AG fueled concern the global recession will wipe out profit growth.
“We will doubtless see more capital having to be ploughed into banks,” said Andy Lynch, who oversees about $10 billion as a fund manager at Schroder Investment Management Ltd. in London and has an “underweight” position on the industry. “It’s been an atrocious quarter for most banks.”
Europe’s Dow Jones Stoxx 600 Index slipped 0.8 percent, while the MSCI Asia Pacific Index declined 2 percent. Futures on the Standard & Poor’s 500 Index rose 0.8 percent as International Business Machines Corp. forecast annual profit that beat analysts’ estimates.
Treasuries fell for a third day as traders added to bets inflation will quicken after President Barack Obama called on Americans to rebuild the economy. His economic team is pushing to complete a bank-rescue plan that can be twinned with the $825 billion stimulus package being negotiated with Congress, people familiar with the deliberations said.
Record Drop
The MSCI World has extended last year’s record tumble, erasing more than two thirds of a 23 percent rally since Nov. 20 as optimism that government measures and interest-rate cuts would revive the global economy evaporated.
In the U.K., unemployment rose at the second-fastest pace since 1991 in December as the worsening recession prompted companies from retailers to automakers to cut jobs. The pound fell to a record low against the yen and the weakest since 2001 versus the dollar.
Barclays, the U.K. lender that turned down government funding last year, lost 20 percent to 58.4 pence. The shares have plunged 62 percent this month, valuing the London-based company at 4.9 billion pounds ($6.7 billion).
‘Nationalization’
“One solution for Barclays is nationalization and that’s a huge concern,” said Schroder’s Lynch.
KBC, Belgium’s biggest bank, retreated 33 percent to 6.5 euros, bringing the four-day slump to 68 percent. The Belgian government asked a panel of experts to draw up a report on the current situation of Belgian banks and may take “coherent” measures based on the report, according to a statement today.
Analysts forecast earnings at financial companies in the Stoxx 600 will rise 42 percent in 2009 following a 59 percent slide last year, according to Bloomberg data. The benchmark index posted its worst annual slump on record in 2008 as more than $1 trillion in credit losses and writedowns eroded profits.
“The fourth quarter has been horrible so far,” said Philippe Gijsels, a Brussels-based senior structured-product strategist at Fortis Global Markets. “A lot of companies are trying to cope with a new reality,” he said in a Bloomberg Television interview.
‘Worst Year’
ThyssenKrupp retreated 1.7 percent to 16.43 euros after Morgan Stanley lowered its recommendation to “underweight” from “equal weight.”
“2009 is shaping up to be the worst year for the industry on our records,” London-based Morgan Stanley analyst Ephrem Ravi wrote in a note to clients today.
Angang Steel Co., China’s second-biggest steelmaker, plummeted 13 percent to HK$6.90 after saying earnings last year more than halved.
China Life slumped 7.5 percent to HK$20.30. Allianz SE, Germany’s biggest insurer, slid 4.6 percent to 57.31 euros.
UBS AG cut its recommendation for EasyJet Plc and Air France-KLM Group to “sell” from “neutral,” saying in a note to clients “the global recession will mean higher unemployment and fewer passengers.”
EasyJet, Europe’s second-biggest discount airline, retreated 2.6 percent to 258 pence. Air France-KLM, the region’s biggest carrier, sank 1.6 percent to 7.67 euros.
Technology Shares
Analysts estimate a 21 percent decline in profits for travel and leisure companies in 2009, following a 23 percent slump in 2008, Bloomberg data show.
Technology stocks were led higher by Ericsson AB and IBM. Ericsson rallied 13 percent to 63 kronor as the world’s largest maker of wireless networks said fourth-quarter net income was 3.89 billion kronor ($460 million) on sales of 67 billion kronor and plans to deepen cost reductions and eliminate about 5,000 more jobs.
IBM added 3.7 percent to $85 in pre-market trading in New York. Net income will climb to at least $9.20 a share in 2009, IBM said yesterday. That topped the $8.75 average of analysts’ estimates compiled by Bloomberg. Fourth-quarter profit also exceeded projections, even as sales decreased.
BlackRock Inc. slipped 4.6 percent to $103.44 in early New York trading after the largest publicly traded U.S. asset manager said fourth-quarter earnings fell 84 percent as declines in stock and bond markets cut fees.
Concern that stock losses will deepen remains elevated. The benchmark for European options, the VStoxx Index, added 2.2 percent to 54.72, for a 28 percent increase since the beginning of the 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: Adam Haigh in London at ahaigh1@bloomberg.net
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