U.S. Stock Futures Fall as Goldman Sachs Faces Probes in Europe

By Lynn Thomasson and Chris Nagi

April 19 (Bloomberg) -- U.S. stock futures fell, extending the biggest one-day decline in more than two months, after the U.K. and Germany signaled inquiries into Goldman Sachs Group Inc.

Contracts on the Standard & Poor’s 500 Index expiring in June slipped 0.3 percent to 1,186.9 as of 10:27 a.m. in Tokyo. The benchmark index for American equities retreated 0.2 percent last week, halting the longest streak of gains in a year. Nasdaq 100 Index futures dropped 0.2 percent to 2,005 today.

Goldman Sachs faces a regulatory probe in Britain and scrutiny from the German government after the U.S. Securities and Exchange Commission sued the firm for fraud tied to collateralized debt obligations. U.S. equities decreased the most since February after the suit spurred concern fallout from the financial crisis isn’t over.

“You get a punch in the gut with these Goldman Sachs issues,” said Don Wordell, who oversees the RidgeWorth Mid-Cap Value Equity Fund, which has beaten 97 percent of its peers during the past five years. “It brings investors back to reality. There’s a tremendous amount of skepticism.”

The Nikkei 225 Stock Average fell 1.6 percent to 10,924.78 in Tokyo. The broader Topix index dropped 1.6 percent to 972.7, with more than 10 times as many stocks declining as advancing.

Weekly Decline

Goldman Sachs sank 10 percent last week, the most since March 2009, after the SEC sued the bank and one of its vice presidents. The 1.6 percent retreat in the S&P 500 on April 16 erased gains earlier in the week spurred by better-than- estimated earnings results from S&P 500 companies.

The most profitable firm in Wall Street history wiped out its 2010 advance and ended the week at $160.70, the lowest price since March 3. The SEC said the bank created and sold CDOs tied to subprime mortgages in early 2007, as the U.S. housing market faltered, without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against them. Goldman Sachs said the claims are “completely unfounded.” Paulson wasn’t accused of wrongdoing.

Bank of America Corp., Morgan Stanley and JPMorgan Chase & Co. lost more than 4.7 percent on April 16. The lawsuit comes as President Barack Obama is trying to pass the most sweeping overhaul of financial regulations since the 1930s. The proposal would mean more oversight of derivatives trading and hedge funds, a consumer financial-protection authority and a system for unwinding large systemically important firms when they fail.

European Losses

Deutsche Bank AG, Germany’s largest lender, fell 7.3 percent to 55.99 euros on the day of the suit for the biggest retreat in more than eight months. UBS AG, Switzerland’s biggest bank by assets, slipped 2.8 percent to 17.93 Swiss francs. BNP Paribas SA, France’s biggest bank, slumped 3.8 percent to 55.35 euros.

U.K. Prime Minister Gordon Brown yesterday called for the Financial Services Authority to start an investigation, saying he was “shocked” at the “moral bankruptcy” indicated in the suit. Germany’s financial regulator, Bafin, asked the SEC for details on the suit, a spokesman for Chancellor Angela Merkel said.

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.