Nov. 11 (Bloomberg) -- European stocks fell for the first time in three days, led by financial shares and commodity producers, on a worsening profit outlook and drop in oil and metals prices.

Intesa Sanpaolo SpA slumped 17 percent as Italy's second- biggest bank scrapped its cash dividend following a 54 percent slide in profit. Julius Baer Holding AG slipped 4.9 percent after saying assets under management declined. BHP Billiton Ltd., the world's biggest mining company, and BG Group Plc, the U.K. gas producer, tumbled more than 9 percent.

Europe's Dow Jones Stoxx 600 Index lost 4 percent to 212.17, extending this year's retreat to 42 percent. More than $28 trillion has been erased from the value of global equity markets as credit losses and writedowns topped $910 billion in the worst financial crisis since the Great Depression.

``Markets are shifting their concern from the financial sector to the wider economy and very clear signs of recession,'' said Andrew Popper, chief investment officer at SG Hambros in London, where he helps manage about $13.7 billion. There's ``a lot of negative news about the economy which continues to weigh on the market and how that will impact on earnings.''

Earnings for the 1,246 companies in western Europe that reported results since Oct. 7 declined 11 percent on average, trailing expectations by 4.5 percent, Bloomberg data show.

National Markets

National benchmark indexes fell in all 18 western European markets. The U.K.'s FTSE 100 sank 3.6 percent, with Taylor Wimpey Plc tumbling 13 percent as the homebuilder said orders have fallen 40 percent. France's CAC 40 lost 4.8 percent, led by Total SA. Germany's DAX slid 5.3 percent.

The euro-area economy will probably contract 0.7 percent next year, Morgan Stanley wrote in a report, citing the financial market turmoil and slowdown abroad. That's down from 0.2 percent growth forecast earlier, the brokerage said.

``This puts the current recession on par with the early 1990s,'' Elga Bartsch, chief European economist at Morgan Stanley in London, wrote.

Growth in the U.S., the world's largest economy, will slow to 1.1 percent next year, down from 1.6 percent predicted for 2008, according to economists' estimates compiled by Bloomberg.

Financial stocks slid as Intesa's profit tumbled, Julius Baer said assets under management shrank, and Goldman Sachs Group Inc. downgraded U.S. life insurers on concern they may need more capital and their credit ratings may fall.

Intesa fell 17 percent to 2.52 euros. Third-quarter profit declined 54 percent to 673 million euros on lower income from trading and fees.

Julius Baer, Erste

Julius Baer retreated 4.9 percent to 41.84 francs. The biggest Swiss independent wealth manager said assets under management fell in the year to date as markets eroded the value of portfolios and its hedge funds businesses recorded net outflows.

Allianz SE, Europe's largest insurer, dropped 8.1 percent to 59.89 euros, the lowest in more than a week. Swiss Life Holding, the nation's biggest life insurer, slumped 8.2 percent to 109 francs.

Erste Bank Group AG, Austria's biggest publicly traded lender, lost 9.5 percent to 17.64 euros after saying it will seek shareholder approval to raise 2.7 billion euros ($3.4 billion) by issuing participation certificates that will pay annual interest of 8 percent.

The 8 percent payout ``isn't that much under the current market situation,'' Paul Wessely, a Vienna-based UniCredit SpA analyst, said in an e-mail today. There ``might be some demand but not too much.''

Banco Bilbao Vizcaya Argentaria SA dropped 9 percent to 8.55 euros. Merrill Lynch & Co. downgraded Spain's second-largest bank to ``underperform'' from ``neutral,'' saying the lender's Mexican business will be affected by the global credit crisis.

Commodities Slump

BHP, the world's largest mining company, retreated 9.3 percent to 1,019 pence. Rio Tinto Group, the third-biggest mining company, lost 8.9 percent to 2,592 pence.

Copper fell to the lowest in two weeks in New York on speculation that a deepening slump in the global economy will slash consumption of industrial metals.

BG Group fell 9.4 percent to 904 pence as crude oil slumped as much as 6.6 percent to $58.32 in New York. Total SA, Europe's third-largest oil company, fell 5.2 percent to 40.35 euros.

The International Energy Agency may cut its 2009 oil demand forecast for a third month as the threat of the worst recession since World War II saps fuel consumption, former IEA analysts said.

Three-Decade Low

Taylor Wimpey, battling to survive the biggest homebuilding slump in 25 years, sank 13 percent to 11.5 pence after orders fell 40 percent as it continues to negotiate new loan conditions with lenders.

The U.K.'s largest homebuilder has an order book of 6,607 homes, compared with 11,074 units this time last year.

U.K. home sales tumbled in October to the lowest in at least three decades, with prices falling for a 15th month, the Royal Institution of Chartered Surveyors said.

InterContinental Hotels Group Plc fell 7.6 percent to 499 pence. The owner of the Holiday Inn brand reported a 28 percent drop in third-quarter profit after selling properties and said October sales slowed on a ``sharp deterioration'' in the lodging market.

Cookson Group Plc sank 24 percent to 130 pence after the world's biggest maker of molds for steelmakers said it will miss targets as metal makers cut production to counter slowing demand.

Vodafone Group Plc rose 6.2 percent to 115 pence after the world's largest mobile-phone company reiterated its full-year forecast for adjusted operating profit of 11 billion pounds to 11.5 billion pounds and raised its projections for free cash flow in the full year.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

Last Updated: November 11, 2008 12:01 EST