European, Asian Stocks Drop; UBS, Royal Bank of Scotland Fall

By Adam Haigh

Nov. 3 (Bloomberg) -- Stocks in Europe and Asia dropped as UBS AG reported a wider-than-estimated loss and the U.K. government increased its stake in Royal Bank of Scotland Group Plc. U.S. index futures declined.

UBS sank 4.4 percent as Switzerland’s largest bank posted its fourth consecutive quarterly loss. RBS retreated 1.5 percent after agreeing to put 282 billion pounds ($460 billion) of loans and securities into the government’s Asset Protection Scheme and take an additional 25.5 billion pounds of investment from the Treasury. Bayerische Motoren Werke AG tumbled 6.5 percent after reporting decreased profit.

Europe’s Dow Jones Stoxx 600 Index lost 1.4 percent to 234.29 as of 9:19 a.m. in London. The regional measure has climbed 48 percent since March as the French and German economies unexpectedly exited recessions. The gauge is down 6 percent from this year’s high on Oct. 19 amid speculation the eight-month rebound has outpaced the prospects for earnings and economic growth.

“The basis for the correction seems to rest on three legs,” said Bill O’Neill, a London-based strategist at Merrill Lynch Global Wealth Management, which has $1.1 trillion in assets. “Worries over prospects for holders of equity in banks, concern that interest rate hikes are imminent, and paradoxically that recovery in 2010 will be crippled by a U.S. consumer unwilling or unable to open his or her wallet.”

Australian Interest Rates

The MSCI Asia Pacific excluding Japan Index lost 1.3 percent as Australia raised its benchmark interest rate by a quarter percentage point, becoming the first nation to increase borrowing costs twice this year as the global economy recovers. Japanese markets are closed for a holiday.

Standard & poor’s 500 Index futures expiring next month slipped 0.5 percent.

Governments and central banks are preparing to remove stimulus measures after spending a total of $12 trillion, by International Monetary Fund estimates, to haul economies out of recession. China’s banking regulator plans to review debt levels at some real-estate developers on concern the companies’ borrowings are fueling excessive gains in property prices, a person familiar with the matter said.

The Bank of England should cap its bond purchase plan at 200 billion pounds this week in a signal that it will stop buying assets in the next quarter, former policy maker DeAnne Julius said. The U.K. central bank will expand the program to 225 billion pounds from the current 175 billion pounds on Nov. 5, according to the median estimate of 48 economists in a Bloomberg News survey.

UBS, RBS

UBS retreated 4.4 percent to 16.58 Swiss francs as it reported a net loss of 564 million francs ($552 million), wider than the 337 million-franc median estimate of 12 analysts surveyed by Bloomberg.

RBS dropped 1.5 percent to 38.07 pence. The lender will sell its insurance division and bank branches after negotiations with the European Commission and the U.K. Treasury, pushing it further into government hands. The government’s stake will increase to 84.4 percent as a result of the transaction.

BMW tumbled 6.5 percent to 31.42 euros as the world’s largest maker of luxury cars reported a 74 percent plunge in third-quarter profit to 78 million euros ($115 million).

GlaxoSmithKline Plc declined 1.8 percent to 1,225 pence after the U.K.’s biggest drugmaker was downgraded to “underperform” from “neutral” at BofA Merrill Lynch Global Research, which cited the stock’s outperformance to other health-care companies in the past year.

Delta Lloyd

Delta Lloyd NV fell 2.8 percent to 15.56 in its first day of trading after Aviva Plc raised 1.02 billion euros selling shares of its Dutch unit during the worst slump for European insurers in eight months.

Aviva, the U.K.’s second-biggest insurer by market value, slipped 3.1 percent to 377.1 pence.

Swiss Reinsurance Co. advanced 7.7 percent to 45.68 francs. The world’s second-largest reinsurer reported an unexpected third-quarter profit after more than 3.16 billion francs of investment gains.

Metro AG, Germany’s largest retailer, rose 2.4 percent to 38.40 euros after reporting third-quarter operating earnings that beat some analysts’ estimates and saying a cost-cutting program has started to pay off.

Factory orders in the U.S. climbed 0.8 percent in September after a 0.8 percent decline in August, a Bloomberg News survey of economists showed before the Commerce Department releases the report in Washington today.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net