Stock Market Bears Grow More Convinced 17-Month Rout to Deepen

March 11 (Bloomberg) -- Investors from New York to London grew more convinced stocks will extend their 17-month decline, with pessimism in the U.S. climbing to the highest since the Standard & Poor’s 500 Index entered a bear market in July. Participants in the Bloomberg Professional Global Confidence Survey predict losses in the next six months for the S&P 500, Brazil’s Bovespa, Mexico’s Bolsa, the U.K.’s FTSE 100, Germany’s DAX, the Swiss Market Index and Spain’s IBEX 35. Users in Italy, France and Japan turned less bearish while still predicting declines. The 2,457 responses between March 2 and March 6 followed the worst start for S&P 500 in its 81-year history. The benchmark index for U.S. equities has lost 54 percent since its October 2007 record as a deepening recession spurred companies from New York-based JPMorgan Chase & Co., the largest U.S. bank by market value, to Fairfield, Connecticut-based General Electric Co., the biggest makers of jet engines, to cut dividends. Warren Buffett said this week that the economy has “fallen off a cliff,” while economists in a monthly Bloomberg News survey predicted the U.S. jobless rate will reach 9.4 percent this year. “It’s like an earthquake, what we have at the moment, and the ruins could be tremendous,” said Emmanuel Soupre, a fund manager at Neuflize OBC in Paris who participated in the survey. “I can buy stocks, but only selectively, because I have a long- term horizon.” His company oversees $18 billion. The poll was conducted before stocks around the world staged the biggest rally of the year yesterday as New York-based Citigroup Inc. said it’s having the best quarter since 2007, spurring optimism that the worst of the banking crisis is over. $1.2 Trillion Indexes in all 10 nations in the survey except Brazil have plunged more than 16 percent since the end of 2008 as global credit-market losses at financial firms climbed to almost $1.2 trillion and companies from London-based Anglo American Plc, owner of the world’s biggest platinum producer, to Nissan Motor Co., Japan’s third-largest carmaker, in Tokyo missed analysts’ estimates. The Bloomberg confidence index for U.S. equities posted the biggest decline among the 10 countries, dropping 14 percent to 29.5. A reading below 50 indicates investors expect stocks to retreat in the next six months, while readings above 50 mean they anticipate a rally. The S&P 500 may still be expensive even after its slump to a 12-year low this week. The index is valued at 13.9 times earnings, according to data compiled by Yale University Professor Robert Shiller that measure equities against a decade of profits. At the bottom of the three recessions since 1929 that lasted as long as the current one, the average ratio fell to 8.74. No Recovery “It’s very difficult to see the economy pulling out of the current slide in the short term,” said Mark Bon, a London-based fund manager who helps oversee about $750 million at Canada Life. “It’s too early to try to see if company valuations actually mean anything.” Spain was the only country in which concern was greater than the U.S., with the reading decreasing less than 1 percent to 29.3. Spain’s unemployment, the highest in the European Union, increased for the 11th month in February. The confidence index for U.K. stocks slipped 9.6 percent to 29.6. Edinburgh-based Royal Bank of Scotland Group Plc posted the biggest loss in British history last month, while London- based HSBC Holdings Plc announced last week the U.K.’s largest rights offer to bolster capital after subprime losses curbed profit. Germany, Mexico Respondents also grew more convinced that the Swiss Market Index and Germany’s DAX will decline. Switzerland’s reading slid 4 percent to 36.1, while the German confidence gauge fell 2.6 percent to 33.1. The reading for Mexico-based participants slipped 0.9 percent to 33.7, while Brazil’s figure dropped 9.9 percent to 42.1. That was still the second-highest after Italy. Brazil’s Bovespa erased its 2009 drop yesterday on speculation that bigger interest-rate cuts are in store after data showed the economy shrank the most on record last quarter. Italian, French and Japanese investors became less bearish. The confidence level in Italy climbed 5.3 percent 44.9, while it increased 0.9 percent to 35.8 in France and 1.5 percent to 37.1 in Japan. Italy’s S&P/MIB is valued at 4.8 times the earnings of its 40 companies, the cheapest ratio in western Europe, data compiled by Bloomberg show. To contact the reporters on this story: Cristina Alesci in New York at calesci2@bloomberg.net; Alexis Xydias in London at axydias@bloomberg.net.

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