Stocks head south in Europe, Asia

Stocks retreated in Europe and Asia, led by financial companies, as analysts forecast more credit- market losses for banks and Warren Buffett said "the party is over" for insurers. US index futures fell.

UBS AG fell for a third day in Zurich after Credit Suisse Group said the bank's writedowns may total $15 billion. Japan's Takefuji Corp posted its steepest decline in three weeks, saying it may lose as much as 30 billion yen ($291 million) on derivatives transactions. Allianz SE led insurers lower after billionaire investor Buffett said the industry's profit margins will drop "significantly".

The MSCI World Index decreased 1.1 percent to 1,440.13 at 10:49 am in London. Futures on the Standard & Poor's 500 Index lost 0.3 percent before a report that may show manufacturing contracted. Shares in Europe retreated for a fourth day, while Japan's Nikkei 225 Stock Average fell the most since Feb 6.

"There are a lot of financial companies that investors just don't want to go near," said James Buckley, a London-based director at Baring Asset Management, which oversees about $48 billion.

"There is considerable concern about the near-term earnings outlook because of writedowns."

The MSCI World has dropped 9.4 percent this year on concern losses related to US subprime mortgages and a slowdown in the world's largest economy will curb earnings. Profits at S&P 500 companies are expected to shrink this quarter and next, while analysts have slashed by more than half their profit growth estimates for European companies.

A private survey today may show US manufacturing shrank in February for the second time in three months, pushing the economy closer to a recession, economists said before the release.

Europe, Asia

Europe's Dow Jones Stoxx 600 Index lost 1.6 percent. France's CAC sank 1.5 percent. Germany's DAX retreated 1.6 percent and the United Kingdom's FTSE 100 slipped 1.4 percent.

Earnings for companies in the Stoxx 600 will probably rise only 4.5 percent this year, down from 11 percent predicted at the end of 2007, Bloomberg data show.

The MSCI Asia Pacific Index fell 3.1 percent. Japan's Nikkei slipped 4.5 percent, its biggest loss since Feb 6. Australia's S&P/ASX 200 Index slumped 3 percent.

UBS dropped 4.2 percent to 32.92 francs. Credit Suisse said Europe's biggest bank by assets faces further "large" writedowns from its subprime and other "troubled" assets, which may total 15.5 Swiss billion francs ($15 billion).

"Further writedowns appear likely and could be large," analyst Daniel Davies wrote in a research note yesterday.

"Taking more pessimistic assumptions in order to estimate what losses could be incurred in actually selling this portfolio," he said, "would give a figure closer to 15.5 billion francs".

Barclays Plc, the UK's third-biggest bank, fell 3.6 percent to 460 pence. BNP Paribas, France's largest bank, slipped 1.5 percent to 58.67 euros.

HBOS Plc fell 4.1 percent to 578.5 pence after Bear Stearns Cos. downgraded the UK's largest mortgage lender to "peer perform" from "outperform".

The brokerage expects earnings per share to fall by 6 percent in 2008, saying the bank's exposure to asset-backed securities and other debt securities is greater than expected.

Separately, UBS cut is share-price estimate for HBOS by 9.7 percent to 650 pence.

HSBC Holdings Plc rose 0.2 percent to 767.5 pence after Europe's biggest bank by market value said profit rose 21 percent to $19.1 billion last year as emerging-market lending made up for subprime losses in the US.

Takefuji

Takefuji, Japan's No 3 consumer lender by market value, dropped 6.6 percent to 2,490 yen, the biggest decline since Feb 12, after saying it may cut its full-year earnings forecast because of losses on derivatives transactions arranged by Merrill Lynch & Co.

Allianz, Europe's largest insurer, sank 2.3 percent to 114.88 euros. Swiss Reinsurance Co, the world's biggest reinsurer, declined 2.3 percent to 82.15 francs. Prudential Plc, the UK's second-largest insurance company, lost 1.6 percent to 601 pence.

Buffett's Berkshire Hathaway Inc said on Feb 29 that fourth-quarter profit fell 18 percent on declining insurance rates.

"The party is over," Buffett said in his annual letter to shareholders.

"It is a certainty that insurance industry profit margins, including ours, will fall significantly in 2008. Prices are down."

Agencies

(China Daily 03/04/2008 page17)