By Sarah Turner
LONDON -- The U.K.'s FTSE 100 index came close to joining other European markets in the bear-market club on another gloomy day for European stocks.
Food and construction companies slid as analysts took a knife to forecasts after pessimistic updates from retailing giant Carrefour and brick maker Wienerberger. The pan-European Dow Jones Stoxx 600 index dropped 2.1% to 277.95, its lowest close in three years. Like many national indexes, it already is in bear territory.
Carrefour slumped 8.6% in Paris to its lowest close in more than five years after the retailer reported slowing sales growth in the second quarter as weaker consumer spending took a toll on business in France. French rival Casino, which reports on Friday, fell 3.3%, and Tesco declined 2.1% in London.
Wienerberger plunged 23% in Vienna after the Austrian building-materials company said six-month sales were weaker than forecast. It now expects fiscal-year profit to fall. The company cited the "collapse" of residential construction in the U.K., a "significantly weaker than expected" U.S. market and "no recovery in sight" in Germany. Austria's ATX index fell 3.1% to 3676.86.
Wienerberger's report weighed on others in the sector. French building-materials company Saint Gobain lost 6% as J.P. Morgan slashed 2008 earnings-per-share forecasts for the firm 9%. Italcementi fell 3% in Milan, and Holcim lost 1.5% in Zurich.
Among major national indexes, the French CAC-40 index fell 2.5% to 4231.56, bringing losses for this year alone to nearly 25%, and the German DAX 30 index lost 1.3% to 6305.00, off 22% this year.
The commodities-heavy U.K. FTSE 100 index dropped 2.2% to 5406.80, leaving it 22.24 points shy of a 20% drop from its recent closing peak on Oct. 12. A decline of 20% is the generally accepted definition of a bear market. The day's close was the lowest since Nov. 2, 2005.
Investors in U.K. shares took in more bad news on the housing market and a critical note on retailers on a day when the Bank of England kept interest rates on hold at 5%.
House prices fell 2% in June from a month earlier, according to the Halifax house-price index, bringing the annual decline to 6.1%. Midcap home builder Barratt Developments /zigman2/quotes/209812640/delayed UK:BDEV -1.25% said it will cut about 1,200 jobs and scrap its dividend after completions fell 14% in the first half and cancellation rates rose 34%. The stock, after being battered for weeks, jumped 24%.
"I can't think of a better example of what it means to be stuck between a rock and a hard place. Recent news on the growth front has been disappointing...while inflation has shown no sign of subsiding," said Stuart Porteous , head of economics at Royal Bank of Scotland.
Banks gave back gains made Wednesday; Lloyds TSB /zigman2/quotes/200709414/composite LYG -1.69% dropped 4.2%; Barclays /zigman2/quotes/206581728/composite BCS +1.41% lost 3%.
Retailers tumbled after Goldman Sachs downgraded luxury fashion company Burberry /zigman2/quotes/205386705/delayed UK:BRBY +1.77% , jeweler Signet /zigman2/quotes/204614427/composite SIG +3.29% and department store Debenhams to "sell." Burberry led the retreat, falling 6.2%.
Not even discount retailers were immune from the retail selloff. Associated British Foods /zigman2/quotes/204493701/delayed UK:ABF -0.44% , operator of low-cost clothing chain Primark, fell 3.8%.
Food company Cadbury fell 7.5% after Merrill Lynch downgraded the stock to "underperform."
Australia, Shanghai Fall; Tokyo Edges Higher
Australian stocks fell for the third time in four sessions, as investors worried anew about the outlook for major financial companies.
Shanghai stocks also fell, snapping a three-day winning streak. But markets in Tokyo and Hong Kong edged higher.
In SYDNEY , the benchmark S&P/ASX 200 index shed 1.5% to 4937.40, its second-lowest close of the year. The market has dropped 22% in 2008, and traders fear a further slide on Wall Street will drive Australian stocks lower.
Westpac fell 3.2%, and both Commonwealth Bank of Australia /zigman2/quotes/200638713/delayed AU:CBA +0.58% and Australia & New Zealand Banking Group shed 2.3%. Conglomerate CSR /zigman2/quotes/208004144/delayed AU:CSR -1.45% dropped 15% after flagging earnings that were well below market expectations.
In CHINA , the Shanghai Composite index, which tracks yuan-denominated Class A shares and foreign-currency Class B shares, fell 1.5% to 2875.45.
Air China /zigman2/quotes/203408003/delayed HK:753 -2.50% slid 4.1% after the Chinese stock-market regulator allowed the airline to issue as many as 400 million Shanghai-listed shares within six months, raising fears of increased supply.
In TOKYO , the Nikkei Stock Average of 225 companies firmed 0.1% to 13067.21. Financial stocks recovered from early losses; Mitsubishi UFJ Financial Group climbed 3.5%.
David Rogers and V. Phani Kumar
Write to Sarah Turner at email@example.com