Nov. 6 (Bloomberg) -- European stocks dropped for a second day as European Central Bank President Jean-Claude Trichet said the financial crisis may lead to a protracted economic slump, deepening concern the slowdown will stifle profit growth.

Adidas AG tumbled 9.6 percent after the sporting-goods maker posted worse-than-expected profit. Axa SA, Europe's second- biggest insurer, dropped 9.2 percent on lower third-quarter revenue. The worst banking crisis in almost a century pushed the Bank of England to slash its key interest rate 1.5 percentage points, while the ECB cut its benchmark rate by half a point.

``There's a headwind and a stream of bad news,'' said Romain Boscher, a fund manager at Groupama Asset Management in Paris, which oversees $17 billion in stocks. ``The recession is here. The question is, `How long will it last and how profound will it be?' We're entering the unknown.''

The Dow Jones Stoxx 600 Index fell 5.6 percent to 215.48, extending this year's decline to 41 percent. More than $27 trillion has been erased from the value of global equity markets as credit losses and writedowns topped $690 billion in the worst financial crisis since the Great Depression.

Stocks initially pared declines after the Bank of England cut its rate more than economists expected. The ECB's reduction that matched predictions followed by declines in early U.S. trading dragged shares lower. Policy makers in Switzerland and Denmark also reduced rates today.

`Negative Figures'

``The intensification and broadening of the financial turmoil is likely to dampen global and euro-area demand for a rather protracted period,'' Trichet said after the ECB's rate decision. ``Negative figures are appearing progressively.''

The bank discussed reducing rates by 75 basis points, he said. Today's move was the second cut in less than a month.

National benchmarks fell in all 18 western European markets. The U.K.'s FTSE 100 slid 5.7 percent with Royal Dutch Shell Plc and BHP Billiton Ltd. following declines in oil and metal prices. Germany's DAX tumbled 6.8 percent, while France's CAC 40 retreated 6.4 percent.

In the U.S., the Labor Department said 481,000 workers filed initial claims in the week ended Nov. 1, exceeding the 477,000 projected by economists surveyed by Bloomberg News. The number of people staying on benefit rolls was the most since February 1983. Tomorrow's payrolls report is projected to show the economy lost an additional 200,000 jobs in October, bringing the total decline to almost 1 million so far this year, while the unemployment rate jumped to the highest level in more than five years.

Economic Reality

Reports yesterday on jobs and service industries stoked concern the world's largest economy will worsen even as President-elect Barack Obama tries to stimulate growth.

``The effect of Obama's election is erased today by the reality of the economy, which isn't good,'' said Clemence Bounaix, a fund manager at KBL Richelieu Gestion, which oversees $5.2 billion.

Central banks from Washington and Tokyo to Frankfurt and London have lowered borrowing costs in the last month to avert recession and injected cash to unlock credit markets.

The International Monetary Fund predicted economic contractions in the U.S., Japan and euro region next year, calling for further interest-rate cuts and fiscal stimulus.

Adidas, the world's second-largest sporting-goods maker, fell 9.6 percent to 26.64 euros after reporting third-quarter profit of 302 million euros ($388 million). That missed the 320.5 million-euro estimate in a Bloomberg survey of five analysts.

Declining Sales

Axa dropped 9.2 percent to 15.15 euros. Europe's largest insurer had a 3.4 percent decline to 20.14 billion euros in third-quarter revenue on lower sales of life and savings products in the U.S. and U.K. That compares with the 20.2 billion-euro estimate of eight analysts surveyed by Bloomberg.

Earnings for the 956 companies in western Europe that reported results since Oct. 7 declined 6.7 percent on average, trailing expectations by 5.4 percent, Bloomberg data show.

Man Group Plc tumbled 31 percent to 270 pence. The largest publicly traded hedge-fund manager said fiscal first-half profit declined 25 percent after ``extreme moves'' in markets reduced assets under management. Net income from continuing operations for the six months ended Sept. 30 fell to $507 million, or 28.8 cents a share. Analysts surveyed by Bloomberg expected earnings of 31 cents a share.

3i Group Plc sank 13 percent to 515 pence. Europe's biggest publicly traded private equity firm posted its first drop in asset values in five years. The company is experiencing a more ``challenging second half,'' said 3i Chief Executive Officer Philip Yea.

Slowing Demand

Shell, Europe's biggest energy company, retreated 7.4 percent to 1,642 pence. Total SA, the region's largest oil refiner, dropped 6.4 percent to 40.02 euros.

Oil slumped, matching yesterday's loss of more than 7 percent, on signs that fuel demand will contract as the global economy slows. Crude for December delivery declined as much as 7.9 percent to $60.16 a barrel in New York.

Mining shares retreated as copper slumped. BHP Billiton, the world's largest mining company, sank 15 percent to 969 pence. Anglo American Plc, the fourth-biggest diversified mining company, tumbled 15 percent to 1,326 pence.

Copper fell for a second day as an increase in inventories signaled less demand for the metal used in pipes and wires.

The Stoxx 600 is valued at 9.4 times reported earnings of the companies in the index, below the average over the past four years of 14 times profit. The gauge traded at 7.9 times earnings on Oct. 27, the lowest since at least January 2002.

The Standard & Poor's 500 Index trades at 20.8 times earnings, up from a low of 17.2 on Oct. 10. The MSCI World Index is valued at 12.3 times profit, up from 10.5 on Oct. 27.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

Last Updated: November 6, 2008 12:29 EST