European, Asian Stocks Decline; U.S. Index Futures Retreat

June 15 (Bloomberg) -- European and Asian stocks fell on speculation share prices have outstripped the prospects for earnings with the MSCI World Index trading at the highest level relative to profits in four years. U.S. futures slid.

BHP Billiton Ltd., the world’s biggest mining company, and Royal Dutch Shell Plc, Europe’s largest oil producer, retreated more than 2.8 percent as copper, lead and crude decreased. TomTom NV, Europe’s largest maker of car-navigation devices, slid 7.6 percent after saying it plans to raise 430 million euros ($596 million) selling shares.

The MSCI World fell for a second day, losing 1 percent at 10:33 a.m. in London. The gauge of 23 developed markets has surged 43 percent since March 9 on speculation the $12.8 trillion pledged by the U.S. government and Federal Reserve will end the deepest economic contraction since the Great Depression.

The rally has left the index trading at 18.2 times earnings, the most expensive level since 2004, weekly data compiled by Bloomberg show.

“Equity valuations have gone from exceptionally cheap to neutral territory,” said Bob Parker, who helps oversee about $600 billion as vice chairman of Credit Suisse Asset Management in London. “For the rest of June, we’ll probably trade sideways or give up some of the gains. There is a serious concern, justifiably so, of a number of constraints on growth recovery going into 2010.”

Budget Deficits

Group of Eight finance ministers began drawing up contingency plans for rolling back budget deficits and bank bailouts as the economy shows signs of recovery and investors start worrying about inflation.

Officials meeting in Lecce, Italy, over the weekend said it’s prudent to consider what exit strategies to deploy once global growth is secured and asked the International Monetary Fund to examine how to do so without reigniting the two-year crisis. At the same time, they said it’s premature to rein back more than $2 trillion in stimulus packages.

European payrolls contracted by the most on record in the first quarter as the recession forced companies to eliminate jobs. Employment in the 16-member euro region dropped 0.8 percent from the fourth quarter, when it fell 0.4 percent, the European Union statistics office in Luxembourg said today.

Europe’s Dow Jones Stoxx 600 Index slipped 1.7 percent today as all 19 industry groups declined. The MSCI Asia Pacific Index lost 1.5 percent, retreating from the highest level since October. Futures on the Standard & Poor’s 500 Index fell 1.3 percent.

Copper Slides

BHP slid 2.8 percent to 1,444 pence, while Rio Tinto Group, the world’s third-largest mining company, decreased 5.3 percent to 2,950 pence.

Copper declined in London on speculation supply may outpace demand in China, the world’s largest consumer, as the country’s imports climbed to record levels for the fourth month and domestic stockpiles jumped to the highest in nearly 15 months.

Shell sank 3.2 percent to 1,596 pence, the biggest intraday retreat in more than five weeks. Crude oil for July delivery dropped as much as 1.9 percent to $70.71 a barrel on the New York Mercantile Exchange.

Aker Solutions ASA gained 1.5 percent to 56 kroner after Goldman Sachs Group Inc. upgraded shares of Norway’s largest engineering company to “buy” from “neutral,” and added them to its “conviction buy” list.

The brokerage boosted its recommendation on oil-service companies to “attractive” from “neutral,” saying the industry has “underperformed integrated oils” and the exploration and production sector since mid-2007.

TomTom, Holcim

TomTom slid 7.6 percent to 6.91 euros. The company plans to raise funds in a fully committed rights offering and through a private placement. The manufacturer said its lenders also agreed to change the terms of its financial covenants to provide “greater headroom.”

TomTom has 1.16 billion euros of net debt after it bought navigation firm Tele Atlas for 2.9 billion euros to gain access to the market for digital maps and to expand services.

Holcim Ltd. slipped 1.1 percent to 61.3 Swiss francs. The world’s second-biggest cement maker agreed to buy Australian operations from Cemex SAB de CV for A$2.02 billion ($1.61 billion) to enter the markets for concrete and crushed rock.

The Swiss company aims to raise about 2 billion francs ($1.84 billion) by selling as many as 55.4 million shares in a rights offer to pay for the purchase, it said today. The price is equal to 6.6 times Cemex Australia’s earnings.