European, Asia Stocks Drop; U.S. Futures Fall Before Jobs Data

By Sarah Jones

Oct. 2 (Bloomberg) -- European and Asian stocks fell and U.S. index futures retreated before a report that may show the jobless rate in America climbed to a 26-year high in September.

BHP Billiton Ltd. and Total SA sank for a fourth day as metals and oil prices slid. Tesco Plc led U.K. retailers lower as Citigroup Inc. rated the shares “sell” in new coverage. Toyota Motor Corp., which gets 31 percent of its revenue in North America, retreated 3.1 percent in Tokyo after its U.S. sales slumped last month.

Europe’s Dow Jones Stoxx 600 Index slid 0.9 percent at 8:04 a.m. in London, extending its second straight weekly decline to 1.1 percent. The MSCI Asia Pacific Index sank 2.1 percent, bringing its slump since Sept. 25 to 2.9 percent.

“October has started with a collapse on Wall Street and Asian markets following suit,” said Melbourne-based Ben Potter, a research analyst at IG Markets. “The U.S. non-farm payroll figures will help many determine how equities finish this week.”

Futures on the Standard & Poor’s 500 Index lost 0.2 percent, indicating the benchmark measure for U.S. equities may extend its 1.4 percent weekly slide. The S&P 500 tumbled by the most in three months yesterday as a gauge of manufacturing unexpectedly fell and jobless claims grew more than forecast.

A Labor Department report today may show U.S. unemployment climbed to 9.8 percent, from 9.7 percent in August, according to the median estimate of 81 economists surveyed by Bloomberg News. Payrolls probably fell by 175,000 workers, the smallest drop in 13 months, they survey also showed.

Goldman Sachs, Whitney

Goldman Sachs Group Inc. yesterday said the U.S. economy probably lost more jobs in September than it previously anticipated, citing “disappointing” economic data including the number of people receiving jobless benefits.

Payrolls probably fell by 250,000 workers last month rather than the 200,000 Goldman Sachs had previously estimated, chief U.S. economist Jan Hatzius said in a note to clients.

“It’s all to do with non-farm payrolls and if Goldman Sachs are right, then I think the market’s cage will be rattled,” said David Buik, a London-based market analyst at BGC Partners.

Separately, Meredith Whitney said in the Wall Street Journal that the U.S. economic recovery will falter as banks continue to curb lending to small companies.

“Access to credit is being denied at an accelerating pace,” Whitney, whose 2007 prediction that Citigroup Inc. would cut its dividend triggered a plunge in the bank’s stock, said in a commentary in the Wall Street Journal. While large companies have no problem obtaining loans, small businesses “have never had a harder time,” she said in the article, dated yesterday.

2009 Rally

Europe’s Stoxx 600 has still surged 50 percent since March 9 and recorded its biggest quarterly gain since 1999 as the European Central Bank kept interest rates at a record low and the French and German economies unexpectedly exited recessions. The rebound has sent price-earnings valuations on the index this month to the highest levels since 2003.

BHP, the world’s largest mining company, dropped 1 percent to 1,627 pence as copper, lead, nickel and tin fell in London. Rio Tinto Group, the third-biggest, sank 1.9 percent to 2,528 pence.

Total, Europe’s third- largest oil company, fell 0.7 percent to 39.64 euros. Crude oil for November delivery dropped as much as 1.2 percent to $70 a barrel on the New York Mercantile Exchange.

U.K. Retailers

Tesco slipped 2 percent to 385.9 pence, while J Sainsbury Plc sank 1.4 percent to 318.5 pence and William Morrison Supermarkets Plc declined 1.6 percent to 273.4 pence. The U.K. retailers retreated after Citigroup initiated coverage of the shares with a “sell” recommendation.

Toyota, Japan’s largest carmaker, fell 3.7 percent to 3,380 yen after its U.S. sales slumped 13 percent in September following the end of the “cash for clunkers” rebate program. Honda Motor Co., which had a 20 percent drop in U.S. sales, declined 3.4 percent to 2,670 yen.

CIT Group Inc. climbed 14 percent to $1.21 in Germany. The 101-year-old commercial lender is seeking to cut at least $5.7 billion of debt as part of a plan to avoid collapse and return to profitability after nine quarters of losses.

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