Global Stocks, U.S. Index Futures Fall as Credit Crisis Widens

Oct. 6-- "It's time to start buying,'' said Hiroyuki Bando, chief manager for fixed income, equities and currencies in Tokyo at Mitsubishi UFJ Trust & Banking Corp. ``The economy will become weaker. Interest rates will go lower.''

Stocks tumbled around the world, the euro fell to a 13-month low against the dollar and oil dropped below $90 a barrel as the year-long credit market seizure caused bank bailouts to spread through Europe. Government bonds rallied.

Russia's Micex Index fell 12 percent, leading declines among benchmark stock indexes. BHP Billiton Ltd. slid 8.9 percent and UBS AG lost 8.6 percent as commodities producers and banks dropped the most in the MSCI World Index. The gauge of 23 developed countries is down 30 percent this year, the worst annual performance since at least 1970.

The euro weakened more than 1 percent against the dollar after the German government and state banks were forced to pledge $68 billion to rescue Hypo Real Estate Holding AG. Crude dropped 39 percent from its record on July 11 as the global economy slows. 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.

"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.''

The MSCI World Index lost 2.5 percent to 1,110.21 at 9:35 a.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.

`Intervention Needed'

Europe's Dow Jones Stoxx 600 Index sank 4.1 percent as BNP Paribas SA said it will take control of Fortis in Belgium and Luxembourg. The MSCI Asia Pacific Index lost 4.4 percent. Futures on the Standard & Poor's 500 Index slipped 2.1 percent, as JPMorgan Chase & Co., the biggest U.S. bank by deposits, fell 5.1 percent.

"It will probably be a rough week for global investors as they realize the credit crisis has a long way to play out,'' said Frederic Dickson, who helps oversee $25 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. ``U.S. action was an absolutely essential first step, and global intervention is needed.''

National benchmark indexes sank in all 17 western European markets that were open. France's CAC 40 slumped 4.6 percent, and the U.K.'s FTSE 100 decreased 4.7 percent. Germany's DAX fell 4.4 percent.

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

Emerging Markets

The MSCI Emerging Markets Index dropped 5.4 percent, bringing this year's retreat to 44 percent. Turkey's ISE National 100 Index sank 6.2 percent.

The euro fell to a 13-month low against the dollar and dropped to its weakest versus the yen in more than two years.

The MSCI World lost 30 percent this year as bailouts of financial companies accelerated and bank credit losses and writedowns approached $600 billion. The index for 23 developed countries is valued at 13.6 times the earnings of its companies, the lowest since at least 1995, according to data compiled by Bloomberg. Europe's Stoxx 600 trades at 11 times earnings, near the lowest since at least 2002, while the S&P 500 is valued at 20.9 times earnings.

`Challenged'

UBS lost 9 percent to 21.82 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. She cut her third-quarter earnings-per-share estimate to 13 cents from 43 cents.

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 slid 5.1 percent to $43.56 in Germany.

BNP Paribas dropped 2.2 percent to 69.77 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 31 percent to 5.16 euros. The German government and the country's banks and insurers agreed on a 50 billion-euro rescue package for commercial property lender after an earlier bailout faltered.

U.K. Chancellor of the Exchequer Alistair Darling said Britain is "ready to do whatever it takes'' to help its banks. French President Nicolas Sarkozy, who convened an Oct. 4 meeting with leaders of Europe's four biggest economies, called for a global summit ``as soon as possible'' to implement ``a real and complete reform of the international financial system.''

Protecting Depositors

Germany will guarantee the savings of private account holders, Chancellor Angela Merkel said, in a bid to prevent a rush of withdrawals. 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.

The S&P 500 fell 9.4 percent last week, the most since the September 2001 terrorist attacks, as U.S. President George W. Bush signed the rescue package into law to stem a crisis that has claimed Bear Stearns Cos. and Lehman Brothers Holdings Inc.

The legislation enables the government to purchase non- performing assets from institutions and suspend an accounting rule requiring businesses to report losses if asset values fall.

The euro earlier reached $1.3610, the lowest since Sept. 5, 2007. 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.

Falling Dominoes

"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.

Asian money-market rates stayed at the highest in more than nine months. Hong Kong's three-month interbank offered rate rose to 3.85 percent. The Tokyo interbank offered rate for such loans was unchanged at a nine-month high of 0.868 percent.

BHP Billiton, the world's largest mining company, sank 8.9 percent to 1,082 pence. Rio Tinto Group, the third-biggest, slipped 9.9 percent to 3,063 pence.

Royal Dutch Shell Plc, Europe's biggest oil company, dropped 4.4 percent to 1,557 pence.

Crude oil fell for a fourth day in New York, dropping as much as 4.2 percent to $89.95 a barrel. Power station coal prices at Australia's Newcastle port dropped 6.1 percent last week, a seventh decline. Copper declined 6 percent to $5,648 a metric ton on the London Metal Exchange.

Commodities Drop

Datong Coal Industry Co., China's second-largest producer of the fuel by capacity, slumped by the 10 percent daily limit to 15.29 yuan in Shanghai. PT Bumi Resources, Indonesia's biggest power-station coal producer, tumbled 31 percent to 2,200 rupiah, extending a six-day, 19 percent slide.

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.''

Treasuries rose for a fourth day, sending two-year notes to their longest winning streak in six weeks. Two-year note yields fell 5 basis points to 1.53 percent as UBS said the Federal Reserve will halve its benchmark interest rate to 1 percent by March 31 to combat a recession.