European, Asian Shares Retreat; U.S. Stock-Index Futures Fall
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By Adam Haigh
Sept. 14 (Bloomberg) -- Stocks in Europe and Asia declined, ending a seven-day advance for the MSCI World Index, on concern the six-month rally in equities has outpaced the prospects for earnings and economic growth. U.S. index futures dropped.
Societe Generale SA and Deutsche Bank AG fell after Nomura Holdings Inc. downgraded the shares. BHP Billiton Ltd., the world’s biggest mining company, sank 2.2 percent in London as metals retreated. Honda Motor Co., which gets 47 percent of its sales in North America, slid 3 percent in Tokyo on concern the yen’s appreciation to a seven-month high against the dollar will reduce the value of overseas revenue.
The MSCI World fell 0.9 percent at 12:20 p.m. in London, as all 10 industry groups declined. The measure’s 61 percent surge since March 9 pushed valuations to 27.3 times the profits of its 1,659 companies at the end of last week, the most expensive level in more than six years, data compiled by Bloomberg show.
“There’s a lot of vulnerability still in the global economy,” said Michael Dicks, head of research and investment strategy at Barclays Wealth in London, which oversees about $203 billion. “There’s still a lot to do. Stocks are getting back to fair value and it requires the economy to keep going for them to keep going,” he said in a Bloomberg Television interview.
Europe’s Dow Jones Stoxx 600 Index dropped 1.2 percent today, while Standard & Poor’s 500 Index futures expiring in December slid 0.8 percent. The MSCI Asia Pacific Index sank 1.8 percent, led by Hankook Tire Co., as the U.S. imposed a 35 percent tariff on Chinese-made tires.
Recovery, Recession
The U.S. recovery may be the slowest since World War II to regain all the ground lost during the recession, even if economists’ more optimistic forecasts for expansion turn out to be right.
The slump this time was so deep, said JPMorgan Chase & Co. chief economist Bruce Kasman, that the 3.5 percent average quarterly growth rate he sees in the next year won’t be enough to bring gross domestic product back to its $13.42 trillion pre- crisis peak. That’s in contrast with the last 10 recoveries, when GDP returned to its previous levels within 12 months.
Joseph Stiglitz, the Nobel Prize-winning economist, said yesterday that the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc.
“In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview in Paris. “The problems are worse than they were in 2007 before the crisis.”
European Economy
Europe’s economy probably returned to growth in the current quarter, the European Union said today. The euro-area economy may expand 0.2 percent in the third quarter and 0.1 percent in the fourth after shrinking 0.1 percent in the three months through June, the European Commission said in updated economic forecasts.
Fund managers including Rothschild & Cie Gestion’s Philippe Chaumel are betting that the global economic recovery won’t be strong enough to support further gains in so-called cyclical stocks. BlackRock Inc. and OppenheimerFunds Inc. are moving money out of shares whose profits are more tied to economic growth into defensive equities after a six-month, 162 percent surge in the Morgan Stanley Cyclical Index.
Societe Generale, France’s second-biggest bank by market value, declined 3.2 percent to 49.16 euros after Nomura downgraded the shares to “reduce” from “neutral.” Deutsche Bank slipped 2.4 percent to 48.59 euros as the brokerage trimmed its recommendation to “reduce” from “buy.”
Mining Companies
BHP Billiton slid 2.2 percent to 1,676.5 pence. Rio Tinto Group, the world’s third-biggest mining company, declined 2.7 percent to 2,548 pence. Copper, nickel and zinc retreated on the London Metal Exchange.
Honda fell 3 percent to 2,780 yen as the Japanese currency appreciated versus the dollar to as high as 90.21 today, a level not seen since Feb. 12. A stronger yen reduces the value of overseas sales at Japanese companies when converted into their home currency.
Sony Corp., the world’s second-biggest maker of consumer electronics, dropped 2.4 percent to 2,425 yen. Toyota Motor Corp., which got 31 percent of its revenue last fiscal year in North America, lost 2.6 percent to 3,740 yen.
Hankook Tire Co., the largest overseas tiremaker in China, tumbled 8.8 percent to 20,200 won in Seoul after the U.S. placed tariffs on $1.8 billion of tires from China, acting on a union complaint that imports were pushing U.S. workers out of jobs. Aeolus Tyre Co., the largest Chinese-listed tiremaker by market value, fell 3.3 percent to 12.84 yuan.
Sri Trang Slips
Sri Trang Agro-Industry Pcl, Thailand’s biggest publicly traded rubber producer, dropped 3.4 percent to 14.3 baht. Rubber slumped by the most in eight months in Tokyo as the U.S. tariffs spurred concern demand in the world’s largest consumer of the commodity may decline.
PSA Peugeot Citroen retreated 4.5 percent to 20.41 euros after Credit Suisse Group AG cut its recommendation on Europe’s second-largest automaker to “underperform” from “outperform,” citing the stock’s jump this year and the possible size of a decline in sales as incentive plans end.
Deutsche Telekom AG slipped 1.5 percent to 9.39 euros. Europe’s biggest phone company asked adviser Deutsche Bank to study a potential takeover bid for U.S. mobile-phone operator Sprint Nextel Corp., the Sunday Telegraph reported, citing unidentified people.
Deutsche Telekom, Sprint
Deutsche Telekom will probably need to call on shareholders, including the German government which owns a 32 percent stake, for cash to fund an acquisition of Sprint, the newspaper said. Sprint shares rallied 12 percent to $4.21 in pre-market New York trading.
Deutsche Bank spokesman Michael Lermer declined to comment to Bloomberg, and Sprint spokesman James Fisher said, “We do not comment on rumor or speculation.”
HeidelbergCement AG lost 3.5 percent to 41.73 euros after the German cement maker owned by the Merckle family said it plans a two-for-one share sale to raise funds that will help reduce debt.
Wienerberger AG slid 3.1 percent to 15.02 euros. The world’s biggest brickmaker plans to raise 335.8 million euros ($488 million) in a share sale that hands the Libyan sovereign wealth fund as much as 10 percent of the company.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
Last Updated: September 14, 2009 07:23 EDT
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