European stocks retreated for the first time in seven days on speculation deteriorating earnings will overshadow government efforts to revive the global economy. U.S. index futures fell, while shares in Asia advanced. Alcoa Inc. slid 3.7 percent in Germany after the world’s largest aluminum maker reported its third major production cut in as many months as demand for the metal plunged. Rio Tinto Group sank 4.1 percent after surging 29 percent in the first three days of trading in 2009. Commerzbank AG dropped 3.5 percent as JPMorgan Chase & Co. said the company’s acquisition of Dresdner Bank may curb profits. The Dow Jones Stoxx 600 Index rebounded 17 percent since Nov. 21 through yesterday on speculation that U.S. President- elect Barack Obama will revive the world’s biggest economy with $775 billion of tax cuts and spending as central banks lower interest rates to combat the worst financial crisis since the Great Depression. Meanwhile, the 505 European companies tracked by Bloomberg that announced results since the Stoxx 600 began its rebound posted an average 75 percent decline in profit. “The fourth-quarter reporting season will bring a huge wave of bad news flow,” said Bernd Meyer, the head of European equity strategy at Deutsche Bank AG. “A sustained upswing in the equity market is not likely in the shorter term of the next two or three months. I’m not convinced we are leaving the bottom soon,” he said in a Bloomberg Television interview in London. Deutsche Bank’s asset management division has $716 billion. The Stoxx 600 lost 0.8 percent to 211.28 at 9:40 a.m. in London, the biggest drop in two weeks. Futures on the Standard & Poor’s 500 Index declined 0.7 percent. The MSCI Asia Pacific Index rose 1.5 percent after Obama said U.S. stimulus spending will continue for years. $1 Trillion The Stoxx 600 slid a record 46 percent last year as more than $1 trillion in losses at financial companies eroded profits and the U.S., Europe and Japan fell into the first simultaneous recessions since World War II. The global recession may prompt the Bank of England to reduce its key interest rate tomorrow to an all-time low of 1.5 percent from 2 percent, according to economists surveyed by Bloomberg. The European Central Bank has reduced its benchmark rate by 1.75 percentage points to 2.5 percent since October. Alcoa, Rio Tinto Alcoa slid 3.7 percent to $11.67 in German trading. The company will reduce its global workforce by 13,500 and cut production by 135,000 metric tons. That brings Alcoa’s total output cuts to 750,000 tons, or 18 percent of smelting capacity. Alcoa and rivals Rio Tinto and Century Aluminum Co. are trying to pare costs as the global recession lowers demand for the lightweight metal used in autos, planes, appliances and power grids. The price of aluminum fell 36 percent last year as inventories more than doubled to a 14-year high. Rio Tinto, the world’s third-biggest mining company, lost 4.1 percent to 1,849 pence. BHP Billiton Ltd., the largest, slid 3.6 percent to 1,398 pence. BHP had climbed 12 percent in 2009 through yesterday. Earnings at basic-resource companies in the Stoxx 600 will fall 18 percent this year, according to analysts’ estimates compiled by Bloomberg. That’s the second-steepest decline among 10 industry groups after energy companies, the data show. Commerzbank fell 3.5 percent to 6.17 euros. JPMorgan recommended selling shares of Commerzbank, which is facing further “capital erosion.” Dresdner Bank, which Commerzbank is taking over, may make a loss until 2011, JPMorgan wrote. New Lows Profits at European companies may drop at least 20 percent this year, according to strategists at Goldman Sachs Group Inc. and Merrill Lynch & Co. Earnings may tumble as much as 43 percent from their peak, according to Morgan Stanley. The best start to a year for the Stoxx 600 in at least two decades will give way to losses as slumping corporate profits send equities to new lows, the securities firms say. On the day the index reached its 2008 low, analysts projected profits at companies in the Stoxx 600 would climb 4.5 percent in 2009, data compiled by Bloomberg show. They now estimate earnings will slip 0.8 percent. For U.S. companies in the S&P 500, analysts estimated a profit rebound of 4.3 percent this year, Bloomberg data show. Scottish & Southern Energy Plc, the U.K.’s second-biggest energy supplier, tumbled 7.7 percent to 1,166 pence after saying it will sell stock equivalent to 5 percent of its issued share capital to fund investment in power plants and acquisitions including wind energy projects. Marks & Spencer Group Plc, Britain’s largest fashion retailer, gained 6.8 percent to 255 pence after reporting a 7.1 percent drop in same store sales for the fiscal third quarter. That’s less than the 8.3 percent decline forecast by analysts surveyed by Bloomberg.

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