Monday, September 17, 2007

Global Stocks, U.S. Futures Drop; Northern Rock, Samsung Fall

By Andreas Hippin

Sept. 17 (Bloomberg) -- Stocks in Europe and Asia declined, led by banks, after customers lined up at Northern Rock Plc branches across the U.K. to withdraw their savings. U.S. stock- index futures declined.

Northern Rock, the U.K. mortgage lender bailed out by the Bank of England last week, tumbled 32 percent. Bradford & Bingley Plc and Alliance & Leicester Plc also fell after Citigroup Inc. downgraded the banks' shares. Samsung Electronics Co. led Asian stocks lower after the U.S. Justice Department began investigating makers of flash-memory chips. Microsoft Corp., the world's largest software maker, retreated after losing its appeal of a European Union antitrust ruling.

The Morgan Stanley Capital International World Index slipped 0.6 percent to 1,557.18 as of 11:15 a.m. in London, with financial shares accounting for the biggest decline. Standard & Poor's 500 Index futures sank 0.7 percent to 1,487.3.

``It's a relatively easy call: avoid financial stocks for the time being,'' said Klaus Kaldemorgen, head of Deutsche Bank AG's DWS mutual fund unit, which manages the equivalent of $370 billion. ``The coming month will be very tough. We have very little exposure to banks.''

The dollar traded within a cent of its record low against the euro on bets the Federal Reserve will lower its benchmark interest rate tomorrow. U.S. Treasuries were little changed as speculation increased that the U.S. central bank will limit any rate cut to a quarter percentage point.

`Bad News'

Europe's Dow Jones Stoxx 600 Index lost 1.8 percent to 361.07. National benchmarks fell in all 18 western European markets except for Greece. The U.K.'s FTSE 100 decreased 1.8 percent, as did France's CAC 40. Germany's DAX retreated 0.7 percent.

The Morgan Stanley Capital International Asia-Pacific excluding Japan Index slid 1 percent to 485.33. Japanese markets are closed today for a holiday.

``There is quite a lot of bad news coming out,'' said Tim Scholefield, who helps manage $38 billion as head of equities at Baring Asset Management in London. ``We need to get through that before we see an opportunity and before becoming more positive.''

Northern Rock plunged 140.25 pence to 297.75. Hundreds of clients ignored assurances from Chief Executive Officer Adam Applegarth and U.K. Chancellor of the Exchequer Alistair Darling that their deposits were secure. Savers removed at least 2 billion pounds ($4 billion), or about 8 percent of Northern Rock's total, since Sept. 14, the British Broadcasting Corp. reported, without saying where it got the information.

Separately, Citigroup cut its price estimate for the stock by 47 percent to 400 pence. Deutsche Bank lowered its price projection for the shares by 43 percent to 370 pence.

Citigroup Downgrade

Bradford & Bingley, which makes one in five loans to U.K. landlords, fell 12 percent to 291 pence. Alliance & Leicester, another U.K. commercial and consumer bank, slipped 14 percent to 748.5 pence. Hypo Real Estate Holding AG, Germany's second- biggest commercial-property lender, dropped 3.4 percent to 36.2 euros. All three were downgraded to ``sell'' from ``hold.''

``Whilst accurately measuring the impact of this summer's credit market disruption is difficult, a poor July followed by a treacherous August and a weak start to September means that estimates across the European bank sector are too high,'' Simon Samuels, an analyst at Citigroup in London, wrote in a report published today.

Deutsche Bank AG lost 2.3 percent to 87.87 euros. Citigroup cut its recommendation on the stock to ``sell'' from ``hold.''

Samsung, Microsoft

Samsung Electronics, the world's biggest maker of NAND flash memory, declined 2 percent to 545,000 won after the Justice Department began probing makers of flash memory chips over possible antitrust violations. Unlike computer memory chips, NAND flash memory can retain data such as photos and songs even when the power's turned off.

Samsung and Japan's Toshiba Corp., which also makes NAND chips, said on Sept. 14 they are cooperating. Toshiba's stock didn't trade today because of a holiday in Japan. The shares fell 0.5 percent to 949 yen on Sept. 14.

Microsoft declined 70 cents to $28.34 in Frankfurt. The software maker will have to pay a record 497 million-euro ($689 million) fine and help rivals connect their products to the Windows operating system after losing its appeal of an EU ruling following three years of legal wrangling.

Barclays, Xstrata

Barclays Plc dropped 3.9 percent to 573 pence. ABN Amro Holding NV Chief Executive Officer Rijkman Groenink said in a NOS television interview yesterday that Barclays' bid for the largest Dutch lender probably won't succeed, as its price trails an offer led by Royal Bank of Scotland Group Plc.

Stephen Whitehead, a spokesman for London-based Barclays, declined to comment to Bloomberg News on Groenink's remarks, as did Carolyn McAdam, a spokeswoman for Edinburgh-based Royal Bank.

Xstrata Plc. decreased 2.2 percent to 2,787 pence. The world's largest exporter of energy coal plans to buy two Australian coal mines for A$982 million ($827 million), as rising Asian demand for the fuel is set to send contract prices to a record next year.

Business Objects SA advanced 3.1 percent to 32.06 euros. The world's largest maker of software to track corporate databases hired Goldman Sachs Group Inc. to find itself a buyer, according to an article in Le Figaro's Sept. 15 edition. There are five potential bidders, with German software maker SAP AG the top candidate, the newspaper said.

Philippe Laguerre, a spokesman for Business Objects, and SAP spokeswoman Angelika Pfahler declined to comment. A spokesperson for Goldman Sachs in London wasn't immediately available for comment.

Construction Stocks

Construction stocks dropped across Europe. Grupo Ferrovial SA, Spain's second-biggest construction company, lost 5.6 percent to 52.65 euros after Merrill Lynch & Co. cut its price estimate for the shares by 6.3 percent to 90 euros.

CRH Plc sank 4.6 percent to 26.36 euros. The world's second- biggest maker of building materials is in talks to buy Cemex SAB's U.S. concrete plants, pipe-making unit and cement division for as much as $4.5 billion to increase revenue from the Americas.

Poweo SA shares plummeted 11 percent to 28.98 euros after the French power company that competes with state-controlled Electricite de France SA said profit fell and it wouldn't meet a customer target.

NeuroSearch A/S jumped 17 percent to 325 kroner, the most in more than four years. Tests showed the Danish medical company's experimental obesity treatment helped patients lose more than a 10th of their body weight.

Last Updated: September 17, 2007 06:26 EDT

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