Global stocks head south; US futures decline

Stocks fell in Europe and Asia after Citigroup Inc's announcement of as much as $11 billion in writedowns suggested financial companies may face more losses. US index futures retreated.

Societe Generale SA and Credit Suisse Group led European banks lower after Bear Stearns Cos downgraded the stocks. J Sainsbury Plc tumbled 19 percent as Qatar's Delta (Two) Ltd dropped plans for a 10.5 billion-pound takeover, citing a worsening credit market. Mitsubishi UFJ Financial Group Inc paced the retreat in Asia. Bear Stearns and Merrill Lynch & Co fell in Germany after Lehman Brothers Holdings Inc cut its recommendation on the banks.

Worse to come

"It looks like there may be more bad news to come," said Simon Carter, who helps oversee $3 billion at Aegon Asset Management in Edinburgh.

"The Citigroup writedown due to subprime was much larger than expected. Sainsbury's woes are also not helping."

The Morgan Stanley Capital International World Index sank 0.6 percent to 1,637.88, while Standard & Poor's 500 Index futures dropped 0.9 percent to 1,503.3 as of 11:15 am in London.

US two-year Treasury yields fell to near the lowest since 2005, while the yen rose to a one-week high against the dollar as Citigroup's write down prompted traders to repay loans from Japan used to buy higher-yielding assets.

Europe's Dow Jones Stoxx 600 Index lost 0.6 percent to 377.49. More than three stocks fell for each one that increased.

The United Kingdom's FTSE 100 and Germany's DAX decreased 0.7 percent, and France's CAC 40 slid 0.8 percent. Japan's Nikkei 225 Stock Average slid 1.5 percent.

Credit Suisse, Switzerland's second-largest bank, lost 3.6 percent to 69.85 francs. Societe Generale, the second-biggest French bank by market value, fell 1.8 percent to 106.69 euros.

Bear Stearns cut its recommendation on the stocks to "peer perform" from "outperform".

HSBC falls

HSBC Holdings Plc, Europe's largest bank by market value, fell 2.1 percent to 887 pence. Deutsche Bank AG, Germany's biggest bank, slid 2.9 percent to 84.49 euros.

Mitsubishi UFJ, Japan's largest publicly traded lender, fell 3.3 percent to 1,017 yen, adding to a two-day, 7.6 percent loss. Commonwealth Bank of Australia, the country's biggest homelender, declined 1.8 percent to A$60.08, its biggest drop since August 15.

Bear Stearns decreased $1.16 to $101, and Merrill Lynch lost $1.02 to $56.26 in Germany.

Lehman Brothers analyst Roger Freeman cut his recommendation on the stocks to "equal weight" from "overweight", citing credit-market weakness and concern writedown may increase.

He lowered his price estimate for Bear Stearns to $117 from $145, and to $58 from $79, on concern it may face further writedowns.

Mining stocks followed metal prices lower. BHP Billiton Ltd, the world's largest mining company, dropped 4.1 percent to 1,684. Rio Tinto Group, the world's third-largest, decreased 2.8 percent to 4,245.

Copper declined to the lowest in more than seven weeks on the London Metal Exchange on expanding inventories and falling orders. Nickel and zinc also dropped.

Bloomberg News

(China Daily 11/06/2007 page16)