Stocks in Europe, Asia, U.S. Futures Drop; UBS, Toyota Decline
By Sarah Jones
March 13 (Bloomberg) — Stocks in Europe and Asia dropped
after Carlyle Groups mortgage-bond fund moved closer to
collapse and the dollar slumped against the euro and the yen,
dimming the earnings outlook for banks and exporters. U.S. index
futures retreated.
UBS AG, Europes biggest bank by assets, fell the most in a
month, while Commonwealth Bank of Australia led declines among
lenders in Asia on concern credit-market losses are worsening.
Toyota Motor Corp., which makes about 37 percent of its sales in
North America, tumbled as the dollar sank below 100 yen for the
first time in 12 years.
The MSCI World Index dropped 0.7 percent to 1,420.52 as of
12:55 p.m. in London. The gauge of 23 developed markets had
rallied for two days on the Federal Reserves plan to inject as
much as $200 billion into the financial system. Futures on the
Standard %26amp; Poors 500 Index declined 1.3 percent.
“Everything you see with the Carlyle Group is putting a lot
of uncertainty into the market, said Philippe Gijsels, senior
equity strategist at Fortis Global Markets, which manages $62
billion in Brussels. Investors “need more visibility on earnings
and on credit losses. We are certainly not buyers, he said.
The MSCI World is down 16 percent from an Oct. 31 record as
writedowns and credit losses stemming from the collapse of the
U.S. subprime-mortgage market for banks reached $188 billion. The
S%26amp;P 500 is less than 4 percentage points away from a bear market.
Debt Into Default
Carlyles fund, which received more than $400 million in
margin calls since March 5, today said it was unable to reach an
agreement with lenders. Through March 12, the company has
defaulted on about $16.6 billion of debt, and any remaining debt
is expected “soon to go into default.
U.S. stocks yesterday fell on concern the central bank will
fail to prevent a recession as oil climbed above $110 a barrel.
The MSCI Asia Pacific Index decreased 2.3 percent, the
biggest drop since March 7. Japans Nikkei 225 Stock Average
lost 3.3 percent to the lowest since Aug. 31, 2005. Hong Kongs
Hang Seng Index slumped 4.8 percent, the most in five weeks.
“The news from the hedge-fund industry has not been
good, said Julian Chillingworth, chief investment officer at
Rathbones Unit Trust Management in London. “We need to see de-
leveraging of the banking system, until we see that markets are
going to continue to be very volatile.
Europes Dow Jones Stoxx 600 Index sank 1.8 percent,
snapping a two-day advance. Frances CAC retreated 2.2 percent,
while the U.K.s FTSE 100 lost 1.7 percent. Germanys DAX
decreased 2.2 percent.
Earnings Estimates
Profits for companies in the Stoxx 600 Index will probably
rise only 3.3 percent this year, down from 11 percent predicted
at the end of 2007, Bloomberg data show.
UBS lost 5.5 percent to 30.18 francs. Credit Suisse Group,
Switzerlands second-largest bank, declined 4.2 percent to 50.80
francs. Commonwealth Bank, Australias second-biggest bank, fell
5.6 percent to A$39.50, the most since Feb. 13. Bear Stearns
Cos., the second-largest underwriter of mortgage-backed bonds,
lost 1.8 percent to $60.50 in Germany.
Carlyle Capital Corp. plunged 85 percent to 43 cents in
Amsterdam. The funds blowup is a rare setback for Carlyle Group
co-founder David Rubenstein, who created the fund and tapped
public markets for $300 million last year to expand the
Washington-based firm beyond leveraged buyouts. Carlyle Capital
used loans from 12 banks to buy about $22 billion of AAA-rated
mortgage debt issued by Fannie Mae and Freddie Mac.
Extra Collateral
Stung by writedowns from the subprime-mortgage markets
collapse, banks are asking for extra collateral on even the
safest forms of debt. The spread between 30-year agency mortgage
bonds and 10-year U.S. Treasuries has widened this month to the
highest since 1986, according to Bloomberg data.
UniCredit SpA tumbled 8 percent to 4.38 euros after Italys
largest bank said fourth-quarter earnings fell 0.8 percent to
1.23 billion euros ($1.91 billion), missing analysts estimates,
because of costs from the takeover of Capitalia SpA and a
slowdown in investment banking.
Toyota, Japans biggest automaker, slid 3 percent to 5,250
yen as a stronger yen threatened to erode the value of Japanese
companies dollar-denominated sales. Daimler AG declined 3.3
percent to 52.35 euros as the dollar dropped to the lowest
versus the euro since the currencys 1999 debut. The worlds
second-largest maker of luxury vehicles generates about 20
percent of it sales in the U.S.
Swatch Group AG lost 5 percent to 299.25 francs after
shares of the biggest watchmaker were rated “underweight in
new coverage at Morgan Stanley.
`Consumer Headwinds
“Swatch is more cyclical than the market believes and will
disappoint in 2008 in the face of consumer headwinds, London-
based analyst Louise Singlehurst wrote in a report dated
yesterday. Swatch is scheduled to release earnings tomorrow.
Kazakhmys Plc, Kazakhstans largest copper producer,
dropped 4.2 percent to 1,705 pence after saying it hasnt
received a bid proposal from Eurasian Natural Resources Corp.
A further announcement will be made “as appropriate, the
company said. ENRC yesterday said it may make an offer and has
talked to the copper producer, sending Kazakhmys up 16 percent.
Nestle SA rallied 5 percent to 501.5 francs after the
worlds largest food company said it expects to beat its sales
forecast this year, helped by price increases and higher
shipments. Sales excluding acquisitions, divestments and
currency fluctuations should exceed the long-term growth target
of 5 percent to 6 percent, the company said.
Food and beverage companies were the only gainers among 18
industry groups in the Stoxx 600 Index today.
To contact the reporter on this story:
Sarah Jones in London at
sjones35@bloomberg.net.
