Stocks drop on bank results, oil

Stocks in Europe and Asia dropped as investors speculated bank losses will increase and near-record oil prices will curb economic growth. US index futures rose.

UBS AG fell to the lowest since March in Zurich as the newspaper Sonntag said the European bank hardest hit by the US subprime contagion will post as much as 4 billion francs ($3.9 billion) in losses in the second quarter. Lehman Brothers Holdings Inc slumped after reporting a record $2.8 billion loss in the second quarter. British Airways Plc slipped in London, and Toyota Motor Corp retreated in Tokyo after oil climbed above $139 a barrel last week.

The MSCI World Index lost 0.3 percent to 1,491.89 at 1:51 pm in London. The index has slumped 11 percent from an all-time high in October on concern credit-related losses approaching $400 billion, rising oil prices and higher inflation will stifle profit growth.

"We are still very wary of the financials," said Peter Jarvis, a London-based director of European equities at F&C Asset Management, which has about $200 billion. "It's still not an area that we are ready to go back into, as this further talk of writedowns at UBS shows. The oil price remains a concern."

Futures on the Standard & Poor's 500 Index rose 0.4 percent, after climbing as much as 0.6 percent.

Europe's Dow Jones Stoxx 600 Index declined 0.1 percent, while the MSCI Asia Pacific Index decreased 1.7 percent.

Japan's Nikkei 225 Stock Average declined 2.1 percent to 14,181.38, after ending last week at the highest since Jan. 9.A government report yesterday showed UK producer prices increased at the quickest pace in two decades in May, supporting the Bank of England's case to resist lowering borrowing costs even as the economy edges toward a recession.

UBS fell 3.8 percent to 23.68 francs. The Zurich-based bank may post losses of 2 billion francs to 4 billion francs in the second quarter, Sonntag said, citing unidentified insiders.

Dominique Gerster, a UBS spokesman, declined to comment on the report, saying the company will disclose second-quarter results in August.

Lehman Brothers falls

Lehman Brothers fell 9.2 percent to $29.32. The fourth- largest US securities firm said it will raise $6 billion in capital in a public offering and that it sold about $130 billion of assets, including commercial and residential mortgages as well as real estate, during the second quarter.

British Airways, Europe's third-largest airline, sank 1.6 percent to 229.75 pence. Ryanair Holdings Plc, Europe's biggest discount airline, dropped 5.8 percent to 2.841 euros. Daimler AG, the world's second-largest luxury carmaker, slipped 1.1 percent to 44.58 euros.

Toyota, which gets about half of its profit from North America, dropped 2.7 percent to 5,440 yen. Korean Air Lines Co, South Korea's largest airline, declined 5 percent to 51,300 won.

Agencies

(China Daily 06/10/2008 page16)