Stocks in Europe, Asia, U.S. Futures Decline on Bailout Delay

Sept. 26 (Bloomberg) –Stocks in Europe and Asia and U.S. index futures sank after negotiations on the $700 billion financial bailout plan stalled and Washington Mutual Inc. was seized in the biggest U.S. bank failure in history.

UBS AG, the European bank hardest hit by subprime-related losses, slid 2.8 percent and Woori Finance Holdings Co. tumbled 7.5 percent after Republicans said they wouldn’t support the proposed rescue plan. WaMu plunged 77 percent as JPMorgan Chase & Co. acquired its branch network for $1.9 billion. Vestas Wind Systems A/S retreated 4.9 percent after Morgan Stanley cut its recommendation for the world’s biggest wind-turbine producer.

Europe’s Dow Jones Stoxx 600 Index decreased 1.7 percent to 266.49 at 10:53 a.m. in London, extending its drop this week to 4.2 percent. Futures on the Standard & Poor’s 500 Index expiring in December sank 1.7 percent, while the MSCI Asia Pacific Index slipped 0.6 percent.

“With the bankruptcy of Washington Mutual, the systemic risk has returned,” said Benoit de Broissia, an equity analyst at Richelieu Finance in Paris, which oversees about $6.2 billion. “One of the links in the chain has broken so we wonder if the chain is threatened,” he said in a Bloomberg Television interview.

The MSCI World Index has slumped 21 percent this year as more than $520 billion in writedowns and credit losses at banks worldwide pushed the global economy toward a recession. The measure of 23 developed nations has fallen 2.7 percent this week after the proposal of the bank bailout plan helped spark the biggest two-day rally in 38 years at the end of last week.

House Republicans

National benchmark indexes dropped in all 17 western European markets that were open as shares of Fortis and Old Mutual Plc also declined. A retreat in oil prices weighed on energy producers including Total SA.

A group of House Republicans led by Eric Cantor of Virginia said they wouldn’t support a plan based on the approach outlined by Treasury Secretary Henry Paulson and backed by President George W. Bush and Democratic leaders. The discord sent Paulson back into a late-night meeting on Capitol Hill with lawmakers. Lawmakers are set to meet again this morning.

“There’s a lot of hesitation on the plan,” said Pierre- Yves Gauthier, a founding partner at Alphavalue in Paris. “This stalling is creating more worries. Politics have taken over.”

U.S. treasuries advanced today, with two-year notes heading for a fifth week of gains. European government bonds rose, with yields on two-year notes poised for the biggest weekly decline in eight months.

Growth Forecast

The worsening financial crisis will cause the U.S. economy to contract, JPMorgan said after cutting its growth forecast for the current quarter. The economy will stagnate in the three months through the end of September, the bank’s economists wrote in a note, revising an earlier prediction of 0.5 percent growth.

UBS retreated 2.8 percent to 20.5 Swiss francs.

Money-market rates may rise in Europe after talks on the rescue plan stalled, deepening concern financial institutions will hoard cash and curb lending. One-month dollar loans were trading at 4.4 percent, according to Patrick Jacq, a fixed-income strategist in Paris at BNP Paribas SA. The London interbank offered rate for such loans was at 3.71 percent yesterday, the highest since January.

Fortis, Belgium’s biggest financial-services firm by assets, sank 6.7 percent to 6.09 euros as De Telegraaf reported clients of Dutch unit ABN Amro Holding NV may be moving to other banks.

Woori, which controls the second-largest bank in South Korea, slid 7.5 percent to 12,400 won.

WaMu Tumbles

WaMu plunged 77 percent to 39 cents in Germany. The company is the latest casualty of a financial crisis that drove Lehman Brothers Holdings Inc. and IndyMac Bancorp out of business and led to the hastily arranged rescues of Merrill Lynch & Co. and Bear Stearns Cos., which was itself absorbed by JPMorgan.

Standard & Poor’s cut the market-value ranges for inclusion in its three main U.S. indexes after this year’s rout wiped $1.8 trillion off the nation’s shares.

The dollar retreated today, heading for a second weekly decline against the yen.

Vestas Wind dropped 4.9 percent to 558 kroner. The company had its recommendation cut to “underweight” from “equal- weight” at Morgan Stanley, which said the stock looks “unjustifiably expensive.”

The brokerage also cited “early signs of softening demand among small developers” and an increase in raw-material prices.

Rheinmetall, Insurers

Rheinmetall AG retreated 3.4 percent, to 40.77 euros after Merrill lowered its recommendation for the supplier of weapons for the U.S. Army’s Abrams tank to “neutral” from “buy.”

Insurance stocks will remain “vulnerable to swings in both the credit and equity markets,” Merrill wrote in a separate report, downgrading Aviva Plc to “neutral” from “buy.” Shares in the U.K.’s biggest insurer by premiums dropped 1.7 percent to 531 pence.

ING Groep NV and Old Mutual were lowered to “underperform” from “neutral.” ING shares lost 1.6 percent to 18.55 euros, while Old Mutual sank 4.6 percent to 83.8 pence.

Total, Europe’s third-biggest oil company, declined 1.4 percent to 43.81 euros. Royal Dutch Shell Plc, the largest, declined 1.3 percent to 1,711 pence. Crude oil dropped as much as 3.5 percent to $104.25 in electronic trading on the New York Mercantile Exchange.

SBM Offshore NV slumped 5.6 percent to 16.04 euros as Goldman Sachs Group Inc. downgraded the world’s biggest producer of floating oil production platforms to “sell” from “neutral” and added the stock to its “conviction sell” list.

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