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Bloomberg: European Stock-Index Futures Drop; BHP, Shell, Stora May Fall

By Sarah Thompson

Oct. 4 (Bloomberg) — European stock-index futures declined as investors speculated that central bankers in the region will leave interest rates unchanged.

BHP Billiton Ltd. and Rio Tinto Group retreated in Australia after metals prices dropped. Royal Dutch Shell Plc may follow oil prices lower. Stora Enso Oyj and UPM-Kymmene Oyj will probably fall after Deutsche Bank AG downgraded papermaker stocks as it cut earnings estimates.

“Investors are nervous ahead of the interest-rate decisions today,” said Oliver Stevens, head of dealing at IG Markets Ltd. in Melbourne. “We’ve had a good run and any hawkish comments will alarm. Mining stocks are likely to take their cue from losses in Australia.”

Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, lost 9 to 4438 at 7:44 a.m. in London. The U.K.’s FTSE 100 Index may shed 14, according to CMC Markets, a betting firm.

U.S. stocks fell yesterday the most in a week after Morgan Stanley recommended selling shares of Intel Corp. and Advanced Micro Devices Inc. Asian stocks slid today, snapping a five-day rally.

Europe’s Dow Jones Stoxx 600 Index has advanced 8.9 percent after reaching a five-month low on Aug. 16 on speculation the contagion from a U.S. housing recession is waning.

The European Central Bank will probably keep interest rates at a six-year high as it gauges the impact of the U.S. subprime- mortgage collapse and the rising euro, a survey of economists shows.

Interest Rates

Policy makers meeting in Vienna today will leave the benchmark refinancing rate at 4 percent, according to all but one of the 55 economists surveyed by Bloomberg News. The bank will wait until April before raising its benchmark rate to 4.25 percent, a separate survey shows.

The Bank of England may also keep its key interest rate unchanged today as bankers assess the effect on the economy of higher corporate borrowing costs and a run on lender Northern Rock Plc, a survey of economists shows.

In Australia, BHP Billiton, the world’s largest mining company fell 3.4 percent, and Rio Tinto Group, the third-largest, shed 3.3 percent.

Copper fell in Asia as Southern Copper Corp. sought to end a strike for higher wages by workers in Peru, and as the dollar’s strength damped demand from non-U.S. buyers of the metal.

Shell, Europe’s largest oil company, and Total SA, the third-largest, will also probably drop. Crude oil traded below $80 a barrel in New York after an unexpected rise in U.S. stockpiles eased concern that supplies will be inadequate for the peak-demand winter season.

Stora Enso, BP

Stora Enso, the world’s largest papermaker, and UPM-Kymmene, Europe’s second-biggest papermaker, were lowered to “sell” from “buy” at Deutsche Bank. M-real Oyj, Finland’s third-biggest papermaker, was cut to “hold” from “buy,” while Holmen AB, the Swedish company that supplies newsprint to the Financial Times, was dropped to “sell” from “hold.”

“The European paper companies’ competitiveness in overseas markets has been hit hard and export volumes are at stake,” Deutsche Bank analyst Mathias Carlson wrote in a research note dated today. “We expect European paper prices to be flat in 2008, at best.”

Earnings per share estimates were cut by 40 percent on average across the industry, Carlson wrote.

BP Plc may be active. Europe’s second-largest oil company will announce major restructuring in the next two weeks that will result in job losses throughout the group and the removal of levels of management, the London-based Times reported, citing an unidentified person with knowledge of the matter.

The moves will be announced before BP’s third-quarter results, due Oct. 23, and are intended to reduce bureaucracy, the newspaper said.

Abbot, Gaz de France

Abbot Group Plc may rally after Financial Times reported 3i Group Plc, a U.K. buyout and venture-capital company, made a tentative offer of 375 pence a share for the Scotland-based oil- services company. The Financial Times didn’t say where it got the information.

The offer values Abbot at 870 million pounds ($1.8 billion), the newspaper said. Neither Abbot nor 3i would comment, the newspaper added.

Gaz de France SA might be active. The operator of Europe’s largest natural-gas network may not be able to complete its planned merger with Suez SA before June 2008, Challenges reported, without saying where it got the information.

Northern Rock Plc may be active. Citigroup Inc. is prepared to provide significantly more than 5 billion pounds ($10.2 billion) of financing to smooth any takeover of the U.K. mortgage lender, the London-based Times reported, without citing anyone.

GlaxoSmithKline Plc will probably move after HSBC Holdings Plc cut Europe’s largest drugmaker to “underweight” from “neutral.”

“We see its dividend being held back by the rising debt required to enable the continuing share buy-back,” the bank wrote in a research note.

To contact the reporter on this story: Sarah Thompson in London at [email protected] .

Last Updated: October 4, 2007 02:46 EDT

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