BLBG:Stocks, Commodities Fall as U.S. Futures Pare Loss
European stocks fell, extending losses from the Stoxx Europe 600 Index’s biggest quarterly drop since 2008, as concern deepened the region’s debt crisis will curb growth. U.S. index futures and Asian shares slid.
BHP Billiton Ltd. (BHP) and Rio Tinto Group, the world’s biggest mining companies, declined more than 3 percent as copper tumbled to a 14-month low in London. Commerzbank AG (CBK) and Societe Generale SA led losses in banking shares.
The Stoxx 600 lost 1.7 percent to 222.3 at 10:34 a.m. in London. The measure slumped 17 percent in the third quarter, the most since the final three months of 2008, which followed Lehman Brothers Holdings Inc.’s collapse. The gauge fell for five straight months through September amid concern Greece’s debt crisis will spread to other countries in the region and as reports showed economic growth is slowing.
“The big issue in the euro zone remains avoiding contagion from the all-but-inevitable Greek sovereign default,” Larry Hatheway, the head of macro strategy at UBS AG in London, wrote in a report today. We are “unlikely to get much relief from euro zone uncertainties in the coming months.”
Futures on the Standard & Poor’s 500 Index retreated 0.3 percent today, having earlier lost as much as 1.3 percent, and the MSCI Asia Pacific Index slid 2.7 percent.
Bank of France Governor Christian Noyer said he’s “open” to the idea of using borrowed money to enhance the capabilities of the European Financial Stability Facility, the region’s rescue fund.
‘Greater Intervention’
“It would be unrealistic to expect an increase in the EFSF itself,” Noyer said in a speech today in Tokyo. “But I am personally open to any scheme that would allow existing commitments to be leveraged to provide greater intervention capacity.”
Euro-area finance chiefs will meet today in Luxembourg to weigh the threat of a Greek default, grapple with how to shield banks from the fallout and consider a further boost to the rescue fund. A much-needed “liquidity backstop” for the region must come from governments because the European Central Bank’s mandate requires it to keep purchases of sovereign debt “extremely limited,” said Noyer, who is a member of the ECB.
Some equity strategists say this year’s 19 percent slump in European equities isn’t commensurate with the outlook for companies’ profits. The decline has left the measure trading at 9.3 times estimated earnings, close to the cheapest level since March 2009, data compiled by Bloomberg show.
‘Market has Overreacted’
“The market has overreacted to concerns of slowing growth and sentiment has moved to depressed levels,” Ian Scott, the London-based global strategist at Nomura Holdings Inc., wrote in a report. “Equity valuations appear attractive to us. We expect the earnings recovery to continue, though at a slower pace.”
The ECB may start to reverse this year’s interest-rate increases on Oct. 6 by cutting its benchmark rate from 1.5 percent, according to UBS’s Hatheway. Eleven of 52 economists surveyed by Bloomberg predict the central bank will reduce borrowing costs this week, while the remaining 41 see no change.
Manufacturing in the U.S. probably expanded in September at the slowest pace in more than two years as the economic recovery showed signs of stalling, economists said before the release of the Institute for Supply Management’s factory index at 10 a.m. New York time. The measure was little changed at 50.3 last month from 50.6 in August, according to the median forecast in a Bloomberg News survey.
European Manufacturing
Europe’s manufacturing industry contracted for a second month in September, London-based Markit Economics said today. In the U.K., a manufacturing index unexpectedly increased last month from a 26-month low.
BHP Billiton dropped 3 percent to 1,686.5 pence and Rio Tinto declined 3.8 percent to 2,778 pence. Copper fell as much as 5.5 percent to $6,635 a metric ton in London, the lowest since July 2010.
Commerzbank, Germany’s second-biggest lender, sank 5.5 percent to 1.8 euros and France’s Societe Generale (GLE) lost 6.7 percent to 18.66 euros. Barclays Plc (BARC), Britain’s second-largest bank by assets, retreated 5.8 percent to 152 pence.
Dexia SA (DEXB) retreated 8.8 percent to 1.32 euros as Moody’s Investors Service placed the credit ratings of the lender’s three main operating entities on review for possible downgrade. Les Echos said finance ministers from Belgium and France are meeting today to discuss financing options for Dexia.
‘Big Worry’
“The big worry for Dexia shareholders is a massive dilution of shares,” said Jawaid Afsar, a trader at Securequity Ltd. in Sheffield, England. “There’s speculation that Dexia may be on the receiving end of a bailout. Dexia is the most exposed and the news of a possible downgrade by Moody’s does not help.”
Lundin Petroleum AB (LUPE) rallied 4.2 percent to 122.5 kronor, extending a 32 percent rise from Sept. 30, when the company increased its estimate of recoverable resources for the North Sea Avaldsnes oil prospect. Collins Stewart and Platou Markets were among brokers upgrading the shares today.
Holcim Ltd. (HOLN), the world’s second-biggest cement maker, climbed 2.1 percent to 49.73 francs after SonntagsZeitung reported that board member Thomas Schmidheiny said he’ll increase his stake in the company.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
