Stocks drop in Europe, Asia; US futures decline

Stocks fell in Europe and Asia, capping the worst quarter for the MSCI World Index since 2002, as concern deepened that losses in the credit markets will hurt economic and profit growth. US index futures retreated.

UBS AG dropped in Zurich after Merrill Lynch & Co said the region's biggest bank by assets may have more writedowns, while Marubeni Corp of Japan fell after saying it will close a unit because of subprime-mortgage losses. Toyota Motor Corp, which gets more than half its operating profit from North America, tumbled the most in two weeks in Tokyo. Vodafone Group Plc declined in London after Morgan Stanley recommended selling shares of the world's biggest mobile-phone company.

The MSCI World Index lost 0.4 percent to 1,430.35 at 12:03 pm in London, while futures on the Standard & Poor's 500 Index slipped 0.2 percent.

The MSCI World is down 10 percent this quarter as financial firms posted more than $208 billion in losses related to the collapse of the US subprime mortgage market.

Europe's Dow Jones Stoxx 600 Index declined 0.6 percent, extending its retreat this quarter to 16 percent, the worst start to a year since at least 1987. The MSCI Asia Pacific Index sank 1.6 percent and is down 12 percent in the quarter, the sharpest drop in the first three months in 16 years.

About $3.9 trillion in value has been erased from global stock markets this year, according to data compiled by Bloomberg.

UBS dropped 2.9 percent to 28.14 Swiss francs. The Swiss bank may have a further $11 billion in writedowns in the first quarter and report a 2008 loss, Merrill said. The brokerage cut its 2009 earnings-per-share forecast by 6 percent.

Zurich-based UBS may ask shareholders to approve a capital increase of as much as 16 billion Swiss francs ($16.1 billion), the Sonntag newspaper reported, citing people it didn't identify.

Credit Suisse Group, Switzerland's second-biggest bank, retreated 1.8 percent to 49.88 francs. Merrill reduced its 2008 earnings-per-share forecast by 13 percent and its 2009 forecast by 4 percent.

Analysts have slashed profit-growth estimates for European companies. Earnings will rise only 1.9 percent on average for Stoxx 600 members this year, down from 11 percent predicted at the end of 2007, Bloomberg data show.

"The markets seem incapable of shaking off concerns about US investment banks and the depth of this current US recession," Oliver Stevens, head of dealing at IG Markets in Melbourne, wrote in a note to clients.

JPMorgan Chase & Co, the third-largest US bank, slid 4 cents to $42.67 in Germany.

Marubeni, Japan's No 5 trading house, plunged 6.6 percent to 726 yen, the second-sharpest decline in the Nikkei 225 Stock Average.

The company said on March 28 it will dissolve its structured finance unit due to subprime losses. The company is also being sued by Lehman Brothers Holdings Inc to recover 35.2 billion yen ($352 million) from a loan, according to people with knowledge of Lehman's plans. Marubeni denies wrongdoing.

Toyota slid 5.2 percent to 4,970 yen, the steepest drop since Jan 22.

Vodafone fell 3.1 percent to 152.1 pence after Morgan Stanley downgraded the stock to "underweight" from "overweight" on concern that a European Commission recommendation to lower so-called mobile termination rates could hurt profit. The brokerage lowered its share-price estimate by 21 percent to 170 pence.

Agencies

(China Daily 04/01/2008 page16)