European stocks fell to the lowest level since 1996 on concern profits are deteriorating and banks will need more capital. U.S. futures rose after the Standard & Poor’s 500 Index traded at the cheapest level relative to earnings in two decades.
Bayer AG, Germany’s biggest drugmaker, slid for the ninth straight day after lowering its forecast for 2009 as the deepening global recession erodes demand for plastics. Barclays Plc fell 9.1 percent, leading financial shares lower a day after U.K. banks posted their biggest slump in two decades. Citigroup Inc. added 8.3 percent following a two-day, 51 percent plunge.
“We advise clients to be extremely cautious,” said Philippe Gijsels, a Brussels-based senior structured-product strategist at Fortis Global Markets. “The crisis in the financial sector is clearly not over,” he said in a Bloomberg Television interview.
The Dow Jones Stoxx 600 Index slipped 0.7 percent at 10:59 a.m. in London after earlier sliding as much as 1.4 percent to 162.02, a level not seen since November 1996. The regional gauge has lost 18 percent in 2009 and posted its biggest drop of the year yesterday after Warren Buffett said the U.S. economy is in a “shambles” and HSBC Holdings Plc announced a rights offering.
Futures on the S&P 500 added 0.5 percent to 708.7 after earlier climbing 1.5 percent. The gauge closed at the lowest level since 1996 yesterday.
The S&P 500 traded for 12.2 times company profits from the past 10 years as of yesterday’s close, the cheapest since 1986, according to data compiled by Yale University professor Robert Shiller. He uses a decade of earnings to smooth out short-term fluctuations.