Gloomy mood leads to slide in European stocks

European stocks fell as investors speculated banks may have further writedowns and Ericsson AB's handset unit said earnings will decline. US index futures retreated.

Societe Generale SA fell after BNP Paribas SA, France's largest bank, said it's no longer considering a "potential tie-up". Sanford C. Bernstein & Co wrote yesterday that Lehman Brothers Holdings Inc may have more writedowns. Ericsson, the world's biggest maker of wireless networks, dropped the most in four months.

"The fears about bad debts and counter-party risk in the financial sector are deep-seated," said Richard Scott, who helps oversee about $2.4 billion at Iimia MitonOptimal Plc in Exeter, UK. "Investors' confidence remains shaky and this is leading to periodic sharp sell-offs."

The Dow Jones Stoxx 600 Index lost 1 percent to 297.58 at 11:35 am in London, reversing an earlier gain of as much as 1.1 percent. Futures on the Standard & Poor's 500 Index slipped 0.4 percent. The MSCI Asia Pacific Index jumped 2.8 percent, the most since Feb 14, following gains in the United States on Tuesday.

Asset writedowns and credit losses at financial firms worldwide have reached $195 billion and the US economy has slipped closer to a recession, helping to drag Europe's Stoxx 600 down 19 percent this year.

Stocks pared declines after Morgan Stanley reported profit that beat analysts' estimates.

Earnings from Lehman and Goldman Sachs Group Inc yesterday eased concern investment banks are collapsing, spurring a 3.3 percent rally in the MSCI World Index, the biggest gain since 2002.

Lehman declines

Lehman, which jumped 46 percent yesterday after reporting earnings that beat analysts' estimates, declined in Germany as Bernstein analyst Brad Hintz said the securities firm would still be "exposed to further writedowns" in upcoming quarters.

Lehman, the fourth-largest US securities firm, lost $1.42 to $45.07 in Germany. Bernstein lowered its price estimate on the shares to $65.

Morgan Stanley increased by $2.39 to $45.25 in Germany.

The second-biggest US securities firm said first-quarter net income dropped to $1.45 a share, from $2.51 a year earlier.

Ericsson dropped 12 percent to 10.16 Swedish kronor. Sony Ericsson Mobile Communications Ltd, the smallest of the world's four main mobile-phone makers, said first-quarter earnings and revenue will fall on slower handset sales, higher research costs and a component shortage.

"The market is mistrusting the company, its management, and the stock," said Niklas Lund, a fund manager at Alandsbanken Asset Management in Helsinki, which oversees $1 billion. He does not hold any Ericsson shares.

Nokia Oyj, the world's biggest maker of mobile phones, slid 6.2 percent to 19.19 euros.

Societe Generale declined 6.9 percent to 62.53 euros. BNP Paribas said it's no longer considering a "potential tie-up" with its smaller rival, ending speculation about a merger that would create Europe's second-biggest lender.

Deutsche Telekom AG fell 9.7 percent to 10.28 euros. Europe's largest telephone company said the decline in sales and earnings at its combined Internet and fixed-line unit in Germany will slow this year from 2007 as it slashes costs and adds customers for Web services and bundled phone, Internet and television packages.

Agencies

(China Daily 03/20/2008 page16)