Stocks Drop From Tokyo to London; Stoxx 600 Falls to 5-Year Low

By Adria Cimino

Feb. 20 (Bloomberg) -- Stocks tumbled around the world, sending the MSCI World Index to its biggest weekly drop since November, Europe’s Dow Jones Stoxx 600 Index to a five-year low, and Japan’s Topix Index to the worst level since 1984.

Anglo American Plc decreased 15 percent as the mining company suspended its dividend and share buybacks. Bridgestone Corp., the world’s largest tiremaker, fell 7.4 percent after saying profit will slide 71 percent this year. Lowe’s Cos., the second-biggest home-improvement retailer, declined 4.9 percent on a profit forecast that trailed analysts’ estimates.

The MSCI World Index sank for a ninth straight day, retreating 1.6 percent to 777.90 at 2:11 p.m. in London. The index of 23 developed countries has lost 7.1 percent this week.

Sentiment “is staggeringly bad,” said Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. in London. “There is renewed pressure on equity markets.” Brewin Dolphin oversees about $24 billion.

Futures on the Standard & Poor’s 500 Index slid 1.5 percent. U.S. stocks dropped yesterday, sending the Dow Jones Industrial Average to a six-year low, as concern about rising credit-card defaults dragged financial shares to the lowest level since 1995.

Stocks remained lower after a Labor Department report showed the cost of living in the U.S. rose in January for the first time in six months as gasoline stopped sliding and retailers tried to push through start-of-year increases even as sales slumped.

Treasuries rose, heading for a second straight weekly gain, gold rose to more than $1,000 an ounce for the first time since March 2008 in New York, and the yen climbed against the dollar and euro as investors sought assets seen as havens.

$1.1 Trillion

The euro also dropped against the dollar. European Central Bank President Jean-Claude Trichet said at a conference in Paris that the global credit crisis poses a “serious challenge” to the financial system and economic policy makers around the globe.

The MSCI World has tumbled 51 percent since the start of last year as credit-related losses at financial firms worldwide climbed to $1.1 trillion and Europe, the U.S. and Japan fell into the first simultaneous recessions since World War II.

The gauge of developed countries extended its retreat this month as companies from Electricite de France SA to Diageo Plc posted disappointing results and U.S. Treasury Secretary Timothy Geithner failed to convince investors that his plan to rescue U.S. banks will work.

Europe’s Stoxx 600 fell as much as 3.2 percent to 177.61, a level not seen since April 2003, as UBS AG tumbled. The MSCI Asia Pacific Index lost 2.2 percent, led by Qantas Airways Ltd. after Moody’s Investors Service cut its debt rating.

Anglo American

Anglo American sank 15 percent to 1,056 pence. The company will cut 19,000 jobs to retain cash after metal prices collapsed. Full-year net income fell to $5.2 billion from $7.3 billion a year earlier, Anglo said.

Basic resources shares retreated 5.9 percent, the most among the 19 industry groups in the Stoxx 600.

Cie. de Saint-Gobain SA, Europe’s biggest supplier of building materials, and Lafarge SA, the world’s largest cement producer, each said they will sell 1.5 billion euros ($1.9 billion) in shares to shore up finances eroded by slowing construction markets.

Saint-Gobain slid 17 percent to 23.19 euros. Net income dropped 7.3 percent last year. The global economic crisis makes the 2010 targets set in 2007 “obsolete,” the company said.

Lafarge said cost-cutting initiatives will be extended to help save 200 million euros in 2009. The shares slipped 1.9 percent to 36.11 euros.

‘Clean Things Up’

“We’re at the low point of the economic cycle and companies are trying to clean things up,” Vincent Juvyns, a strategist at ING Investment Management in Brussels, which oversees about $476 billion worldwide, said in a Bloomberg Televison interview. “We’ll see more and more capital increases across industries.”

Europe’s manufacturing and service industries unexpectedly contracted at a record pace this month as consumers held back on spending and companies postponed investments.

Lowe’s lost 4.9 percent to $16.15 in pre-market New York trading. The company forecast first-quarter earnings per share of 23 cents to 27 cents, trailing analysts’ estimates of 31 cents.

JPMorgan Chase & Co. slipped 3.8 percent to $19.81. Meredith Whitney, the financial industry analyst who left Oppenheimer & Co. to start her own firm, said on CNBC Television she doesn’t expect the banks she covers to continue paying dividends at their current levels.

Whitney on Banks

Whitney in October 2007 predicted Citigroup Inc. would cut its dividend amid writedowns and credit losses, triggering the steepest tumble in the company’s shares since September 2002. The New York-based bank slashed the dividend by 41 percent three months later.

Whitney said she would be a seller of Citigroup at its current level. The shares slipped 4 percent to $2.41 in Germany.

Bridgestone sank 7.4 percent to 1,251 yen after saying net income will probably fall 71 percent to 3 billion yen ($32 million) this year as demand for new cars wanes.

Continental AG, Europe’s second-largest car-parts maker, slipped 3.9 percent to 12.73 euros. Michelin & Cie., the world’s second-biggest tiremaker, dropped 2.4 percent to 27.14 euros.

Saab Automobile

Saab Automobile filed for protection from creditors after parent General Motors Corp. said it will cut ties with the Swedish carmaker following two decades of losses. GM slipped 6.5 percent to $1.87 in early trading.

Porsche SE slid 6.5 percent to 34.10 euros. The maker of the 911 sports car was rated “underweight” in resumed coverage at Morgan Stanley with a price estimate of 10 euros.

UBS tumbled 13 percent to 11.09 francs after Switzerland’s largest bank was sued by the U.S. government to force disclosure of as many as 52,000 American customers who allegedly hid their Swiss accounts from tax authorities.

Qantas, Australia’s largest carrier, slumped 4.3 percent to A$1.675 after Moody’s lowered its long-term debt rating to Baa2, the second-lowest investment grade, from Baa1 because of plunging air-travel demand.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.