European Stocks, U.S. Futures Drop; Salzgitter, BHP, Rio Fall

By Sarah Jones

March 5 (Bloomberg) -- European stocks fell, led by raw- material producers as China’s Premier Wen Jiabao refrained from announcing an expansion of the government’s stimulus package and Salzgitter AG gave a disappointing forecast. U.S. futures dropped, while shares in Asia advanced.

BHP Billiton Ltd. and Rio Tinto Group retreated more than 2 percent after surging yesterday on speculation that an expansion of China’s stimulus would boost demand for metals. Salzgitter slid 7.5 percent as Germany’s second-largest steelmaker said it’s “unlikely” to break even in the first half.

Europe’s Dow Jones Stoxx 600 Index slipped 1.2 percent to 165.59 at 9:09 a.m. in London. The gauge had rebounded from a 12- year low yesterday, posting its biggest gain of 2009 on optimism that China would broaden efforts to boost growth in the world’s third-largest economy. Premier Wen said today China’s 8 percent expansion target for this year is within reach, indicating the government doesn’t see the need to increase its stimulus.

“We are very near what could be the cycle low for the stock market but there will still be a lot of false starts,” said Steen Jakobsen, chief investment officer at Capinordic in Copenhagen. “There has been a lot of hope that China can restart the engines again” for the world economy, he said in a Bloomberg Television interview.

Investors will also focus on interest-rate decisions. The Bank of England may cut its benchmark interest rate to 0.5 percent at 12 p.m. in London, while the European Central Bank is expected to reduce rates to a record low of 1.5 percent when it announces its decision 45 minutes later, according to economists surveyed by Bloomberg.

U.S., Asia

Futures on the Standard & Poor’s 500 Index fell 0.8 percent. The benchmark index for American equities rallied yesterday on speculation China would broaden its stimulus and U.S. lawmakers will reach agreement on a plan to stem mortgage defaults.

The MSCI Asia Pacific Index rose 0.6 percent, led by commodity producers and construction companies after Premier Wen pledged to “significantly increase” investment in the economy.

Governments from the U.S. to Australia have sought to introduce policies this year to bolster their economies as a deepening global recession and dividend cuts at companies from HSBC Holdings Plc to General Electric Co. have sent the MSCI World Index plunging 22 percent this year, the worst start since the gauge was created in 1970.

BHP, Rio

BHP Billiton, the world’s largest mining company, lost 3.2 percent to 1,135 pence after rallying 13 percent yesterday. Rio Tinto, the world’s third-biggest mining company, fell 2.9 percent to 1,792 pence. The shares yesterday jumped 14 percent.

Salzgitter slid 7.5 percent to 46.82 euros. The company said it should be able to “more or less breakeven” at the pretax level in 2009 if there is a “notable recovery” in the economy.

Royal BAM Groep NV slumped 12 percent to 5.58 euros. The biggest Dutch builder posted a fourth-quarter loss and dropped sales and profit targets for this year after demand for homes deteriorated.

Earnings for 252 companies in the Stoxx 600 that have reported earnings since Jan. 12 have dropped 94 percent, according to Bloomberg data. That compares to a 58 percent contraction in profit for the 465 companies that have reported results in the S&P 500 during the same period.

Aviva, Michael Page

Aviva Plc dropped 13 percent to 249 pence. The U.K.’s biggest insurer reported a 2008 net loss of 915 million pounds ($1.3 billion), after “significant unrealized losses” related to its corporate bond holdings.

Michael Page International Plc decreased 3.8 percent to 194 pence. The U.K.’s second-largest recruitment company said full- year profit declined 4.3 percent to 97.3 million pounds as it was hurt by the global recession.

“Given the current uncertainty over the economic outlook, it is extremely difficult to predict the performance of our business in the short term,” Chief Executive Officer Steven Ingham said in a statement.

EasyJet Plc slipped 2.8 percent to 302 pence. Europe’s second-biggest discount airline said passenger traffic declined 6.8 percent to 3.02 million passengers last month.

Anheuser-Busch InBev NV added 2.1 percent to 19.85 euros. The world’s largest brewer said it would cut capital spending by at least $1 billion this year, and will now pare $2.25 billion a year in costs by 2011, up from the previous $1.5 billion target.

InBev posted a 41 percent drop in full-year profit to 1.29 billion euros ($1.63 million), missing the average analyst estimate of 1.66 billion euros, as costs to finance the merger that created the company outweighed new revenue from the Budweiser brand.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.