Feb. 29 -- Stocks fell in Europe and Asia, trimming their first monthly gains since October, as financial companies and carmakers dropped on mounting concern the U.S. economy is slipping into a recession. U.S. index futures slid.
Barclays Plc and Allianz SE led banks and insurers lower in Europe as UBS AG said financial firms face $600 billion in credit losses. American International Group Inc. fell in Germany after reporting its biggest quarterly loss. Honda Motor Co. declined in Tokyo as the dollar traded near a three-year low against the yen, and chipmaker STMicroelectronics NV retreated after Dell Inc. reported a surprise drop in profit.
The MSCI World Index decreased 0.7 percent to 1,475.76 at 1:05 p.m. in London. Futures on the Standard & Poor's 500 Index lost 1.1 percent before a report today that will probably show U.S. consumer spending stagnated and inflation accelerated.
``Recession fears are weighing on equity markets,'' said Juergen Lukasser, who helps manage the equivalent of about $20 billion as head of equities at Constantia Privatbank AG in Vienna. ``We haven't left the credit crunch behind us. It's unclear what we are going to see in further writedowns.''
U.S. stocks dropped the most in a week yesterday after slower-than-forecast economic growth, rising jobless claims and Federal Reserve Chairman Ben S. Bernanke's warning of possible bank failures deepened concern a recession is inevitable.
Concern the collapse of U.S. subprime mortgages and a slowdown in the world's largest economy will drag down global profit growth helped push the price-earnings ratio on the MSCI World down to 14.7 in January, the cheapest since at least 1995, monthly data compiled by Bloomberg show.
Rebound
The MSCI World has rebounded 0.6 percent in February. The gauge is poised for its first monthly gain since October as investors speculated banks will avert some losses after the world's largest bond insurers kept their top debt ratings.
Europe's Dow Jones Stoxx 600 Index declined today for a third day, losing 1.2 percent. France's CAC sank 1.1 percent. Germany's DAX retreated 1.5 percent and the U.K.'s FTSE 100 slipped 0.8 percent.
The MSCI Asia Pacific Index fell 1.3 percent. Japan's Nikkei 225 Stock Average lost 2.3 percent, Asia's biggest decline. The S&P/ASX 200 Index retreated 1.4 percent.
Barclays, the U.K.'s third-biggest bank, dropped 4.1 percent to 480.25 pence. ING Groep NV, the largest Dutch financial- services provider, slipped 2.4 percent to 22.24 euros.
Allianz, Europe's biggest insurer, sank 2.8 percent to 117.91 euros. Axa SA, the region's second-largest, lost 2.9 percent to 22.43 euros.
$600 Billion
Financial firms are likely to face at least $600 billion of credit losses, UBS analysts said today. Financial institutions have written down or lost about $160 billion so far and losses from banks and brokers will make up more than half of the losses at $350 billion, the analysts said.
``The fear the European economy might slow is overwhelming,'' said Florian Weber, Dusseldorf, Germany-based chief executive officer at Schnigge Wertpapierhandelsbank AG, in a Bloomberg Television interview. ``Markets might plummet another 5 to 10 percent just because sentiment is so bad.''
Mizuho Financial Group Inc., Japan's third-largest publicly traded bank by market value, lost 6.3 percent to 446,000 yen.
AIG fell 4.8 percent to $47.70 in Germany. The world's largest insurer by assets yesterday posted its biggest quarterly loss as a publicly traded company after an $11.1 billion writedown of guarantees sold to fixed-income investors.
The Commerce Department's report on consumer spending, due at 8:30 a.m. in Washington, may raise concern the biggest part of the economy is starting to falter. The report is also forecast to show that inflation is accelerating even as the economy slows.
Three-Year High
Honda Motor, Japan's No. 2 automaker, sank 3 percent to 3,260 yen, the biggest drop since Feb. 6. Every 1-yen increase against the dollar cuts annual operating profit by 20 billion yen ($191 million), according to Honda.
The yen rose to a three-year high against the dollar after Bernanke said some small U.S. banks may collapse, prompting traders to pare higher-yielding investments funded in Japan.
The weakening dollar increased the appeal of commodities for investors, helping to push crude oil to a record for a fourth day.
Crude oil for April delivery rose as much as 46 cents, or 0.5 percent, to $103.05 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since trading began in 1983. Yesterday, futures rose 3 percent to $102.59 a barrel, a record close.
British Airways
British Airways Plc, Europe's third-largest airline, declined 2.5 percent to 258.75 pence. Air France-KLM Group SA, the region's biggest airline, dropped 1.7 percent to 18.03 euros.
Fuel expenses make up about 30 percent of total costs for airlines, according to calculations by Credit Suisse Group.
STMicroelectronics lost 3.5 percent to 7.99 euros. Logitech International SA, the world's largest maker of computer mice, retreated 3.9 percent to 27 francs. ARM Holdings Plc, which designs semiconductors for Intel Corp., decreased 2.4 percent to 91.25 pence.
Dell, the world's second-biggest personal-computer maker, reported an unexpected drop in fourth-quarter profit after an expansion into retail failed to ignite sales. Excluding some costs, earnings were 34 cents per share, missing the 36-cent prediction in a Bloomberg survey of analysts.
Dell shares dropped 2.4 percent to $20.28 in Germany.
Diageo Plc fell 2.4 percent to 1,034 pence after Goldman, Sachs & Co. downgraded the world's biggest liquor maker to ``neutral'' from ``buy'' following gains in the past month.
``Better opportunities lie elsewhere in the beverages sector,'' London-based analysts including Javier Gonzalez-Lastra wrote in a report dated Feb. 28.
Close Brothers Group dropped 12 percent to 657.5 pence, the steepest decline in the Stoxx 600 today, after the London-based investment bank founded in 1878 said talks about a takeover offer for the company ended.
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