Global Stocks Retreat, Led by Banks, as Credit Crisis Widens

Oct. 6 (Bloomberg) — Stocks tumbled around the world, the euro fell the most against the yen since its debut and oil dropped below $90 a barrel as the yearlong credit market seizure caused bank bailouts to spread through Europe. Government bonds rallied.

The Standard & Poor’s 500 Index retreated 5.4 percent, extending the worst weekly slump since 2001, as concern slower global growth will curb demand for commodities sent Marathon Oil Corp. and Freeport-McMoRan Copper & Gold Inc. down more than 7 percent. The MSCI Emerging Markets Index headed for its biggest loss in at least two decades and exchanges in Russia and Brazil were forced to halt trading. Europe’s Dow Jones Stoxx 600 Index had its steepest intraday decline since 1987.

Today’s plunge erased about $2.5 trillion from global equities after the German government was forced to bail out Hypo Real Estate Holding AG and investors disregarded the U.S. Treasury plan to revive credit markets. The euro weakened the most against the yen since 1999.

“It’s like a fire,” said Emmanuel Soupre, a fund manager at Neuflize OBC Asset Management in Paris, which oversees the equivalent of $33 billion. “It’s easier to extinguish five minutes after the start. Now we’re about an hour into it. We have to act quickly to assure the continuity of the financial system to avoid an irreversible contamination of the entire economy.”

BHP Billiton Ltd. slid 7.8 percent and UBS AG lost 10 percent as commodities producers and banks dropped the most in the MSCI World Index.

Seeking Safety

Investors seeking the safety of government bonds pushed yields on two-year Treasury notes to 1.5 percent, 50 basis points below the Federal Reserve’s main interest rate.

The MSCI World lost 6.4 percent to 1,065.61 at 3:58 p.m. in London as all 10 industry groups decreased. National markets in China, Germany, France, Japan, South Korea and the U.K. fell more than 4 percent.

The Dow Jones Industrial Average dropped 4.7 percent, falling below 10,000 for the first time since October 2004.

The Fed said today it “stands ready” to foster “liquid money market conditions.”

Europe’s Stoxx 600 sank 7.4 percent, the biggest intraday decline since Oct. 20, 1987. BNP Paribas SA said it will take control of Fortis in Belgium and Luxembourg. Only four stocks in the index rose. The MSCI Asia Pacific Index lost 4.4 percent.

“We’re seeing panic all over the markets right now,” said Javier Barrio, head of equity sales for Spanish clients at Banco BPI SA in Madrid. “Governments are taking steps to try to reduce investors’ fears but confidence is weak.”

National Markets

National benchmark indexes sank in all 18 western European markets. France’s CAC 40 slumped 5.8 percent, and the U.K.’s FTSE 100 decreased 5.1 percent. Germany’s DAX fell 5.3 percent.

In Asia, Japan’s Topix index lost 4.7 percent, and South Korea’s Kospi slipped 4.3 percent. China’s CSI 300 Index fell 5.1 percent, as trading resumed after a one-week holiday.

Indonesian stocks plunged the most since the 2002 Bali bombings and the rupiah and bonds dropped as investors exited commodities and emerging markets to limit losses in a global rout.

The MSCI Emerging Markets Index dropped 8.2 percent. Turkey’s ISE National 100 Index sank 7.1 percent, while Saudi Arabia’s Tadawul All-Share Index tumbled 9.8 percent.

Accelerating bailouts of financial companies and bank credit losses and writedowns approaching $600 billion has spurred the rout in global equities. The MSCI World is valued at 13.2 times the earnings of its companies, the lowest since at least 1995, according to data compiled by Bloomberg. Europe’s Stoxx 600 trades at 10.4 times earnings, near the lowest since at least 2002, while the S&P 500 is valued at 20.9 times earnings.

`Challenged’

UBS, the European bank worst hit by credit crisis, lost 10 percent to 21.58 francs. The bank’s earnings power may be “challenged for some time,” and UBS may write down $3.1 billion in the third quarter, Oppenheimer & Co. analyst Meredith Whitney wrote in a note to clients. The Swiss bank has posted $44 billion in losses, according to data compiled by Bloomberg.

Mitsubishi UFJ Financial Group Inc., Japan’s largest bank, fell 9.2 percent to 806 yen. Mizuho Financial Group Inc. dropped 7.8 percent to 402,000 yen.

JPMorgan Chase & Co., the biggest U.S. bank by deposits, slid 5.7 percent to $43.29.

BNP Paribas dropped 2.6 percent to 69.495 euros. France’s biggest bank agreed to take control of Fortis in Belgium and Luxembourg for 14.5 billion euros ($19.8 billion) after an earlier government rescue failed to ensure the company’s stability.

Hypo Real Estate plunged 36 percent to 4.78 euros. The German government and the country’s banks and insurers agreed on a 50 billion-euro rescue package for the commercial property lender after an earlier bailout faltered.

`Whatever It Takes’

German Chancellor Angela Merkel said the government will guarantee savings of private account holders to prevent a rush of withdrawals from the nation’s banking system.

U.K. Chancellor of the Exchequer Alistair Darling said Britain is “ready to do whatever it takes” to help its banks, while Denmark said commercial lenders will provide as much as 35 billion kroner ($6.4 billion) over the next two years to a fund to insure depositors against losses.

U.S. President George W. Bush last week signed a $700 billion rescue package into law to stem a banking crisis that has claimed Bear Stearns Cos. and Lehman Brothers Holdings Inc.

The euro earlier reached $1.3540. It fell to 141.97 yen, the weakest since May 18, 2006, as investors cut holdings of higher-yielding currencies funded in the Japanese currency.

“The euro zone is the second domino of the globe to be falling over after the U.S.,” said Alex Sinton, a senior currency dealer at ANZ National Bank Ltd. in Auckland.

Money Market

The cost of borrowing in dollars overnight jumped, the British Bankers’ Association said. Asian money-market rates stayed at the highest in more than nine months.

BHP Billiton, the world’s largest mining company, sank 7.8 percent to 1,095 pence. Rio Tinto Group, the third-biggest, slipped 10 percent to 3,060 pence.

Freeport-McMoRan, world’s largest publicly traded copper producer, lost $3.19 to $41.67.

Marathon Oil, the largest refiner in the U.S. Midwest, sank $3.83 to $31.75.

Royal Dutch Shell Plc, Europe’s biggest oil company, dropped 5.4 percent to 1,540 pence. PT Bumi Resources, Indonesia’s biggest power-station coal producer, tumbled 32 percent to 2,175 rupiah, extending a six-day, 19 percent slide.

Crude oil fell for a fourth day in New York, dropping as much as 5.3 percent to $88.89 a barrel. Power station coal prices at Australia’s Newcastle port dropped 6.1 percent last week, a seventh decline. Copper declined 6.5 percent to $5,620 a metric ton on the London Metal Exchange.

UBS’s Hong Kong-based economist Duncan Wooldridge reduced his growth forecast in Asia excluding Japan next year to 6.1 percent from 6.9 percent, saying the region will face “recession-like conditions.”

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