Stocks slide for third day in European markets

European stocks fell for a third day, led by manufacturers, steelmakers and homebuilders on concern that rising oil prices will drag down corporate earnings. US index futures were mixed, while shares in Asia gained.

Porsche SE, the maker of the 911 sports car, declined for a sixth day, and ArcelorMittal, the world's largest steelmaker, slipped to a two-week low. Taylor Wimpey Plc led a retreat by British homebuilders after a report showed UK home values fell for an eighth month in May. General Motors Corp dropped in Germany as Citigroup Inc downgraded the stock.

Europe's Dow Jones Stoxx 600 Index lost 0.6 percent to 316.39 as of 1:24 pm in London as 16 of the 18 industry groups declined. The index has dropped 21 percent from a six-and-a-half-year high in June on concern record oil prices, higher inflation and $383 billion in credit losses will curb economic growth.

"Clearly the very high oil price is a particular issue" for carmakers, said Robert Talbut, London-based chief investment officer at Royal London Asset Management, which has $60 billion. "Sentiment has changed. Oil prices will be much higher for much longer than any of us had believed even a short while ago. There are renewed concerns about the pace of economic growth."

Futures on the Standard & Poor's 500 Index slipped 0.1 percent, while the MSCI Asia Pacific Index jumped 1.1 percent.

A bear market in European stocks will last another six to 12 months and a "superbearish" scenario featuring a prolonged period of stagflation can't be ruled out, according to strategists at Morgan Stanley.

First-quarter corporate profits in Western Europe have dropped 25.3 percent, 7.9 percentage points more than at American companies, data compiled by Bloomberg showed, as a US slowdown and a record-high euro also eroded overseas earnings.

That helped make the Stoxx 600 the cheapest in at least six years versus the Standard & Poor's 500 Index relative to earnings, according to Bloomberg data.

National benchmark indexes retreated in all 18 western European markets except Luxembourg and Switzerland. Germany's DAX lost 0.5 percent and France's CAC 40 slipped 0.8 percent. The UK's FTSE 100 fell 0.4 percent. The UK market was closed on Monday for a holiday.

Crude oil gained in New York as a militant attack in Nigeria disrupted supplies and on speculation fuel subsidies in Asian countries will continue to spur demand.

The contract for July delivery rose as much as $1.46 a barrel to $133.65 on the New York Mercantile Exchange from the May 23 close.

Agencies

(China Daily 05/28/2008 page17)