Stocks in Europe, Asia Drop on Economy; U.S. Index Futures Fall

BHP Billiton Ltd. dropped 11 percent as copper retreated and concern deepened $2 trillion in funds for banks won't be enough to stave off a global economic contraction. Siemens AG, Europe's biggest engineering company, sank 5.4 percent. ASML Holding NV tumbled 6.4 percent after the region's largest maker of semiconductor equipment forecast shipments that fell short of analysts' estimates.

The MSCI World Index lost 1.1 percent to 1,011.54 at 10:32 a.m. in London, following the biggest two-day rally on record. Futures on the Standard & Poor's 500 Index slipped 1.6 percent before reports that will probably show retail sales dropped and manufacturing in New York shrank.

``We don't have much of a rosy outlook in terms of global growth next year, that is what is worrying markets,'' said Christian Gattiker, Zurich-based head of equity research at Bank Julius Baer & Co., in a Bloomberg Television interview. ``We have much more to go in terms of earnings deterioration.'' Parent company Julius Baer Holding AG has about $328 billion.

The MSCI World fell 36 percent this year as concern the seizure in credit markets will trigger a global recession erased $27 trillion in value from stocks worldwide. Financial firms reported $637 billion in losses and writedowns from mortgage- related investments since the beginning of 2007.

Two-Day Rally

The benchmark for 23 developed countries rallied 12 percent in the previous two days as governments and central banks worldwide announced bailouts and funding to unfreeze credit markets and prevent the collapse of the global banking system.

The Bush administration said yesterday it was investing $250 billion to purchase stakes in U.S. financial companies.

The injection in banks won't stop stock prices from falling because ``nobody'' believes the measure is sufficient, Japanese Prime Minister Taro Aso said in parliament, responding to a lawmaker's question about his plans to help limit the global crisis.

The cost of borrowing in dollars for three months in London may decline about 14 basis points to 4.50 percent today, according to BGC Partners Inc. The British Bankers' Association will announce today's London interbank offered rate, or Libor prices, that banks charge each other for comparable loans in pounds, after 11 a.m. local time.

Spread Narrows

The dollar Libor-OIS spread, a gauge of demand for cash, narrowed 13 basis points to 341 basis points yesterday. That's still more than triple the level of 105 basis points on Sept. 15. The spread was 24 basis points on Jan. 24.

Europe's Dow Jones Stoxx 600 Index retreated 3.1 percent, as LaFarge SA, the world's biggest cement maker, and Anglo American Plc dropped.

MSCI Asia Pacific Index decreased 1.3 percent, after Posco, the region's third-largest steelmaker, plunged 8.5 percent.

``Recent financial developments and economic data make it clear that the outlook for the U.S. economy has weakened noticeably,'' Yellen said in her speech to the Silicon Valley Chapter of Financial Executives International.

The U.S. is already in a recession by most accounts, according to economists surveyed by Bloomberg News this month.

Sales at U.S. retailers fell 0.7 percent, the most in more than a year, economists said before the Commerce Department due at 8:30 a.m. in Washington. Manufacturing probably contracted this month in the New York region at the fastest pace since March.

Unemployment Rises

European Union leaders meet today to in Brussels to discuss the next steps in responding to the global market meltdown.

U.K. unemployment last month rose to the highest level in almost two years, the Office for National Statistics said today. Claims for jobless benefits increased 31,800 to 939,900, the highest since November 2006.

BHP Billiton, the world's largest mining company, declined 11 percent to 958.5 pence. Anglo American, the fourth-biggest diversified mining company, sank 12 percent to 1,459 pence.

Copper, lead, tin and nickel prices slid on the London Metals Exchange.

Rio Tinto Group, battling a $86 billion takeover bid from BHP Billiton, may delay the planned sale this year of $10 billion of assets because of the global financial crisis. The shares lost 6.1 percent to 2,653 pence.

Posco slipped 8.5 percent to 354,500 won, after Chief Financial Officer Lee Dong Hee said the last three months of the year will be ``very difficult.''

`Recession Beckons'

Siemens and Lafarge led declines among companies that made more than one-fifth of sales in the U.S. last year. Siemens declined 5.4 percent to 50.95 euros. Lafarge, the world's biggest cement company, dropped 4.6 percent to 62.42 euros.

``Recession beckons,'' David Buik said in a Bloomberg Television interview in London. ``There is a realization that the relief rally is over.''

Analysts slashed earnings estimates this year as concern mounted that the global economy is slowing. Profit at companies in the Stoxx 600 are forecast to drop 3.6 percent this year, compared with 11 percent growth forecast at the end of last year, based on data compiled by Bloomberg. Earnings for S&P 500 companies will decline 3.1 percent in 2008, compared with a 15 percent increase predicted in December 2007, the data show.

Valuations

The Stoxx 600 was valued at 8.5 times earnings of companies in the index last week, the cheapest on record, and climbed to 9.7 times profit yesterday. The MSCI World Index traded at 11 times the earnings of its 1,730 companies on Oct. 10, the lowest on record, and closed yesterday at 12.2 times profit.

The S&P 500, the benchmark for American equities, ended last week valued at 17.2 times earnings, also the lowest in more than a year. The index jumped 11.6 percent on Oct. 13, pushing its price-to-earnings ratio to 19.2.

ASML sank 6.4 percent to 10.21 euros. Europe's largest maker of semiconductor equipment said third-quarter profit fell 56 percent on lower machine sales after chipmakers delayed expansion plans.

Intel Corp. climbed 4 percent to $16.56 in Germany after the world's largest computer-chip maker said fourth-quarter sales may rise, signaling that the global financial crisis hasn't halted demand for personal computers. Its third-quarter profit topped estimates, and the forecast for this period was better than some analysts had anticipated.

Clariant, KBC

Clariant AG, the world's biggest maker of chemicals used in printing ink, slipped 6.2 percent to 8.46 francs as Citigroup Inc. cut its recommendation on the shares to ``sell'' from ``hold,'' saying the current ``rocky economic path'' would impact European chemical producers.

KBC Group NV slumped 10 percent to 42.30 euros after reporting a net loss in the third quarter as it wrote down the value of collateralized debt obligations.

----With reporting by Rishaad Salamat in London. Editor: Stephen Kirkland, Daniel Hauck. -- Stocks in Europe and Asia fell for the first time in three days and U.S. index futures tumbled after Federal Reserve Bank of San Francisco President Janet Yellen said the U.S. is already in a recession.