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EUROPE: European stocks hit lowest levels in three months

European stocks fell to the lowest in three months this week on concerns that banks would post more losses and a US manufacturing index provided the latest evidence the world's largest economy is slipping into recession.

UBS AG and Deutsche Bank AG dropped after Goldman Sachs Group Inc forecast more writedowns and Lehman Brothers Holdings Inc cut earnings estimates for the banks. Groupe Danone SA, the world’s largest yogurt maker, and Unilever led losses among the food and beverage industry after UBS recommended selling the shares. Trinity Mirror PLC declined as Morgan Stanley downgraded European media stocks.

The Dow Jones STOXX 600 Index dropped 3.5 percent to 295.08, bringing the total fall for the past three weeks to 8.4 percent, ending the week at its lowest since March 17. The STOXX 50 retreated 3.3 percent and the Euro STOXX 50 slid 3.8 percent.

“It will take quite some time before we see an improvement in the banks and in the earnings situation,” Petra von Kerssenbrock, an analyst at Commerzbank AG in Frankfurt, said in a Bloomberg Television interview.

“It’s too early to invest” in financial stocks, she added.

National benchmark indexes retreated in 16 of the 18 western European markets. Germany’s DAX Index fell 2.8 percent and France’s CAC 40 lost 3.7 percent. The UK’s FTSE 100 slipped 3.1 percent.

The benchmark STOXX 600 has fallen 19 percent this year on concerns that credit-related losses approaching US$400 billion, record oil prices and higher inflation will push the US economy into a recession.

The next 18 months “will be a very testing time,” Julian Chillingworth, London-based chief investment officer at Rathbone Brothers PLC said in a Bloomberg Television interview. “It’s really like the early ‘90s. I don’t think the depth of the slowdown will be as deep but it could be as long.”
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