Europe, U.S. Futures, Asia Shares Slump; Axa, Philips May Drop

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By Sarah Thompson

Oct. 10 (Bloomberg) — European and U.S. index futures plunged and Asian shares tumbled on concern the deepening credit crisis will spur the failure of more financial companies and drive the global economy into recession. The yen and U.S. Treasuries rallied as investors shunned higher-yielding assets.

U.S.-traded securities of Axa SA, Deutsche Bank AG and Royal Philips Electronics NV fell more than 5 percent. Nobel Biocare Holding AG may drop after it said third-quarter revenue declined on slowing demand in North America and Europe and warned it may not meet full-year guidance for operating margins. Japan’s Nikkei 225 Stock Average slumped 11 percent, the second- biggest drop on record.

Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, lost 208, or 8 percent, to 2,380 at 7:34 a.m. in London. The U.K.’s FTSE 100 Index may retreat 285 points, according to CMC Markets, a betting firm. The index last traded below 4,000 in July 2002. Standard & Poor’s 500 Index futures slid 3.6 percent. The MSCI Asia Pacific sank 6.2 percent.


“What we are witnessing is mass selling due to a combination of sheer panic and fear, combined with complete uncertainty over the future of the world’s major economies,” said Martin Slaney, head of derivatives at GFT Global Markets in London. “Investors are effectively pricing in the possibility of a global depression.”

More than $4 trillion has been erased from global equities this week even as central banks from London and Frankfurt to Washington and Hong Kong were forced to cut interest rates after the yearlong credit-market seizure stoked concern banks will run short of money.

Next Victims

The Dow Jones Industrial Average fell below 9,000 for the first time since 2003 yesterday as higher borrowing costs and slower consumer spending spurred concern carmakers, insurers and energy companies will be the next victims of the credit crisis.

Russian stock exchanges delayed the opening of trading today and Indonesia extended a two-day halt. Iceland yesterday suspended equity trading today until Oct. 13 after the government seized Kaupthing hf, the country’s biggest bank.

Asian money-market rates climbed as injections of more than $32 billion by Japan and Australia and a round of global interest-rate cuts failed to unlock credit. The three-month interbank offered rate in Tokyo, known as Tibor, was fixed at 0.878 percent, the highest since March 1998.

Gold jumped to the highest in nearly 11 weeks as investors sought bullion as a haven.

Singapore fell into the first recession since 2002 as manufacturing slumped, prompting the central bank to end a policy favoring gains in its currency in an effort to support the economy.

Bankruptcy Protection

New City Residence Investment Corp. filed for bankruptcy protection, becoming Japan’s first real-estate investment trust failure. Yamato Life Insurance Co. also filed for court protection from creditors in the nation’s first bankruptcy in the industry in seven years.

American depositary receipts of Axa, Europe’s second- biggest insurance company, lost 8.9 percent from the close in Paris yesterday. ADRs of Deutsche Bank, Germany’s biggest bank, slipped 8.2 percent, while Philips, Europe’s largest maker of televisions, sank 5.3 percent.

Nobel Biocare will probably fall. Before today, the company expected sales to rise in the “low single-digits” while profitability on earnings before interest and taxation was supposed to remain at 2007 levels at a constant exchange rate.

Chief Executive Officer Domenico Scala, the former Syngenta AG executive brought in to replace Heliane Canepa in July 2007, said Aug. 11 there were “encouraging initial signs” of recovery and that the worst might be over in the U.S. market.

Travis Perkins

Travis Perkins Plc might fall after the U.K. building materials distributor that owns the Wickes home-improvement chain was cut to “sell” from “hold” at Royal Bank of Scotland Group Plc due to its high debt levels.

“We believe Travis Perkins will need to either agree to new terms on its covenants or raise additional equity, as the group, on our forecasts, will breach existing covenants in 2009,” analysts including John Messenger said today in a note.

Hypo Real Estate Holding AG will probably slide. The commercial property lender that needed a revised 50 billion-euro ($67.8 billion) bailout was downgraded to “underperform’ from “neutral” at Credit Suisse Group AG, which cited limited potential for upside and a deteriorating environment.

Renault SA might drop after recommendation and price estimates of European carmakers were cut at Citigroup Inc., which cited a forecast of 8 percent decline in industry sales next year.

“It just gets worse,” London-based analysts John Lawson and Kristina Church wrote in a note sent to clients today. “Shocks to consumer and business confidence and to the workings of the credit markets weigh heavily on big-ticket purchases.”

Citigroup downgraded Renault, France’s second-largest carmaker, to “hold” from “buy,” citing a “deteriorating outlook” for the French automaker’s sales.

To contact the reporter on this story: Sarah Thompson in London at

Last Updated: October 10, 2008 02:40 EDT

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