Stocks in Europe, Asia, U.S. Index Futures Slump; Dexia Falls

Sept. 29 (Bloomberg) — Stocks tumbled in Europe and Asia and U.S. index futures retreated as bank bailouts accelerated and the $700 billion plan to rescue American financial institutions failed to unlock money markets.

Dexia SA sank 28 percent after the governments of Belgium, the Netherlands and Luxembourg were forced to rescue Fortis and the U.K. seized Bradford & Bingley Plc. Hypo Real Estate Holding AG slumped 70 percent as the German government and a group of private banks provided a 35 billion-euro ($50 billion) guarantee for the commercial-property lender. Westpac Banking Corp. of Australia slid 3.5 percent. Wachovia Corp. declined 56 percent on increasing speculation the sixth-largest U.S. bank by assets may be forced to seek a buyer or mortgage partner.

Europe’s Dow Jones Stoxx 600 Index lost 3.2 percent to 257.45 at 12:40 p.m. in London. Futures on the Standard & Poor’s 500 Index dropped 1.6 percent following the measure’s steepest weekly slump since May. The MSCI Asia Pacific Index slid 2.7 percent today.

“There’s more pain to come,” said Andy Lynch, who manages about $3 billion at Schroder Investment Management Ltd. in London. “People knew the bailout was going to happen. Now it’s back to the same-old, same-old of capital writedowns and weekend bailouts. Earnings estimates for next year still are too high.”

Credit losses at UBS AG, along with profit declines at technology companies such as Ericsson AB, helped send earnings lower at 153 of the 332 members of the Stoxx 600 tracked by Bloomberg that reported quarterly results since the beginning of July. More than 40 percent of the Stoxx 600’s companies trailed Wall Street’s estimates, Bloomberg data show.

Credit Losses

The MSCI World Index is down 23 percent this year as banks worldwide racked up more than $554 billion in credit losses and writedowns, pushing the global economy toward a recession.

National benchmark indexes fell in all of the 18 western European markets. The U.K.’s FTSE 100 sank 3.5 percent, while France’s CAC 40 lost 3.1 percent. Germany’s DAX slid 2.9 percent as Commerzbank AG and Siemens AG also declined. Luxembourg’s LuxX plunged 8.3 percent, led by Fortis and Dexia, the steepest drop today among benchmark gauges worldwide tracked by Bloomberg.

The cost of borrowing in euros for three months soared to a record after the bailouts deepened concern more financial institutions will collapse, prompting banks to hoard cash. The euro interbank offered rate, or Euribor, rose 10 basis points to 5.24 percent, the biggest jump since June, the European Banking Federation said today.

Volatility Rises

The VStoxx benchmark index for European options, which measures the cost of using options as insurance against declines in the Euro Stoxx 50 Index, rallied to an eight-month high.

U.S. lawmakers reached agreement yesterday as House Republican leaders backed away from opposition to the bank rescue proposal after it included plans to create insurance for mortgage-backed securities. The House and Senate are scheduled to vote on the bill early this week, although it wasn’t clear last night that it has sufficient votes to pass the House.

European confidence in the economic outlook fell to the lowest since the slump in the wake of the Sept. 11 terrorist attacks. An index of executive and consumer sentiment dropped to 87.7 in September from 88.5 in August, the European Commission in Brussels said.

The British pound declined the most against the dollar in 15 years and the euro weakened. The currencies also retreated versus the Japanese yen.

`Not Over’

Fortis lost 10 percent to 4.68 euros after the company received a bailout of 11.2 billion euros. Belgium will buy 49 percent of Fortis’s Belgian banking unit for 4.7 billion euros, while the Netherlands will pay 4 billion euros for a similar stake in the Dutch banking business, the governments said. Luxembourg will provide a 2.5 billion-euro loan convertible into 49 percent of Fortis’s banking division in that country.

“The banking crisis is not over,” said Jacques Porta, who helps manage $180 million at Ofivalmo Patrimoine in Paris. “Look at Fortis today, we are not sure other banks in Europe are not going to have the same problems. The problem is even if we have the good news with the Paulson plan, investors think it is not enough to stop all this mess.”

Dexia plunged 28 percent to 7.25 euros. The company may soon announce a plan to raise capital in a bid to reassure markets, Le Figaro newspaper, said without citing anyone. Dexia spokeswoman Ulrike Pommee told Bloomberg News the bank held a board meeting last night to discuss Fortis and the financial crisis. She declined to comment on the report the bank may raise capital.

Hypo Real Estate

Bradford & Bingley, the U.K.’s largest lender to landlords, was seized by the government after the credit crisis shut off funding and competitors refused to buy mortgage loans that customers are struggling to repay.

Banco Santander SA, Spain’s biggest lender, will pay 612 million pounds ($1.1 billion) to buy Bradford & Bingley branches and deposits, the U.K. Treasury said today. Santander shares declined 3 percent to 10.59 euros.

Hypo Real Estate slumped 70 percent to 4 euros. The German government and a group of private banks will provide a guarantee to rescue the bank from insolvency. The country’s second-largest commercial-property lender earlier said it expects to scrap a 2008 dividend payment after securing a “multi-billion-euro” credit line to shield itself from turmoil on financial markets.

Commerzbank, Germany’s second-biggest bank by assets, sank 18 percent to 11.77 euros even after saying its funding is secure. Westpac, Australia’s third-largest bank, declined 3.5 percent to A$23.15.


Wachovia slid 56 percent to $4.40 in trading before the market opened. Three days after Chief Executive Officer Robert Steel told employees Wachovia was “strong and performing well,” the Wall Street Journal said the Charlotte, North Carolina-based bank was in advanced takeover talks with Wells Fargo & Co. Citigroup Inc. also may make a bid, the newspaper reported.

Iceland agreed to buy 75 percent of Glitnir Bank hf for 600 million euros in a government bailout of the nation’s third- largest bank, as the global credit crisis extends to the Atlantic island. The stock was suspended from trading.

Basic-resource shares retreated as metal prices dropped in London. BHP Billiton Ltd., the world’s biggest mining company, lost 7.2 percent to 1,270 pence. Rio Tinto Group, the second- largest iron-ore exporter, retreated 6.2 percent to 3,475 pence. Copper, lead, nickel and tin prices sank.

Renault SA, France’s second-biggest carmaker, fell 3.5 percent to 45.67 euros after Credit Suisse Group AG downgraded the shares to “underperform” from “outperform.”

Siemens AG lost 2.4 percent to 65.18 euros. Europe’s largest engineering company may face a “certain slowdown” in the growth of its orders in the coming months as the economy falters, Les Echos reported, citing CEO Peter Loescher.

Akzo Nobel NV sank 9.6 percent to 32.08 euros. The world’s biggest maker of paints postponed a plan to repurchase 1.6 billion euros of its stock, as debt repayments loom.

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