Nov. 3 (Bloomberg) -- Stocks slumped from Sydney to London and industrial metals slid, while the yen and gold advanced as investors retreated from riskier assets after three of Europe’s biggest banks showed the industry is still far from recovery.

The MSCI World Index of 23 developed markets sank 0.9 percent at 7:57 a.m. in New York. Futures on the Standard & Poor’s 500 Index decreased 0.7 percent even as Berkshire Hathaway Inc. agreed to buy Burlington Northern Santa Fe Corp. in the company’s biggest takeover under Warren Buffett. The yen rose against 15 of the 16 most-traded currencies tracked by Bloomberg. Copper slid 2.1 percent in London, while gold futures rose to within 0.9 percent of a record.

UBS AG, Switzerland’s largest bank, posted a wider loss than analysts estimated, while Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc received a second bailout from the U.K. taxpayer. Jon Greenlee, associate director of the Federal Reserve division that regulates banks, said yesterday that defaults on commercial real estate still threaten institutions.

“The basis for the correction seems to rest on three legs” said Bill O’Neill, a London-based strategist at Merrill Lynch Global Wealth Management, which has $1.1 trillion in assets. “Worries over prospects for holders of equity in banks; concern that interest-rate hikes are imminent; and paradoxically, that recovery in 2010 will be crippled by a U.S. consumer unwilling or unable to open his or her wallet.”

U.K. Banks

Financial shares led the retreat in Europe’s Dow Jones Stoxx 600 Index, which slumped 1.6 percent. UBS sank 6.6 percent in Zurich after posting its fourth consecutive quarterly loss.

RBS slid for a third day, declining 9.6 percent in London, while Lloyds fell 1.6 percent. The U.K. Treasury will inject 25.5 billion pounds ($41.6 billion) into RBS, for a total of 45.5 billion pounds, making it the world’s costliest bank bailout. Lloyds will raise 21 billion pounds from investors, with the government providing 5.8 billion pounds.

Delta Lloyd NV retreated 3.2 percent in its first day of Amsterdam trading after Aviva Plc raised 1.02 billion euros ($1.5 billion) selling shares of its Dutch unit in the worst slump for European insurers in eight months. Aviva dropped 4.8 percent in London.

Emerging Markets

The MSCI Emerging Markets Index declined 1.7 percent and was poised to close at the lowest level in seven weeks. The Dubai Financial Market General Index sank 5 percent, the steepest drop among equity indexes tracked by Bloomberg, as oil fell below $78 a barrel.

Benchmark indexes retreated today in every major emerging market open for trading except China and Malaysia. Russia’s Micex Index lost 3.6 percent and India’s Bombay Stock Exchange Sensitive Index dropped 3.1 percent.

The Shanghai Composite Index added 1.2 percent even as a person familiar with the matter said China’s banking regulator plans to review debt levels at some real-estate developers on concern borrowings are fueling excessive gains in property.

Futures indicated the S&P 500 will retreat even after Berkshire said it would split each of its Class B shares into 50 new shares to help acquire Burlington Northern. Buffett’s firm will buy the 77.4 percent of the railroad it doesn’t already own for $100 a share, valuing the transaction at about $44 billion, including $10 billion in outstanding debt. Burlington’s shares surged 28 percent in pre-market New York trading after closing yesterday at $76.07.

‘All-in Wager’

“It’s an all-in wager on the economic future of the United States,” Buffett said in a statement today.

The S&P 500 yesterday pared its advance on comments from the Fed’s Greenlee, who said: “Although conditions and sentiment in financial markets have improved in recent months, significant stress and weaknesses persist.” Greenlee told a House Oversight subcommittee hearing in Atlanta that “the condition of the banking system is far from robust.”

Central banks and governments are preparing to remove stimulus measures after spending a total of $12 trillion, by International Monetary Fund estimates, to haul economies out of the recession and combat almost $1.7 trillion in losses and writedowns at the world’s largest financial firms. The European Commission said today that the banking industry “remains fragile” and further losses at financial institutions may total 400 billion euros through next year.

The Fed Open Market Committee begins its two-day meeting today. The European Central Bank and Bank of England’s policy decisions follow on Nov. 5.

Yen, Dollar

The yen climbed 1.2 percent versus the Norwegian krone and 1.1 percent compared with the Australian dollar as investors bailed out of higher-yielding currencies. The Dollar Index, which tracks the currency against the U.S.’s biggest trading partners, climbed 0.6 percent.

The Australian dollar fell against 13 of 16 major currencies after the country’s central bank raised its benchmark interest rate for the second time in two months without indicating it will accelerate increases.

The RBA suggested “inflation is not the problem for the foreseeable future, leaving the impression that a December rate hike is no longer baked in the cake,” a team of BNP Paribas SA analysts led by Hans-Guenter Redeker, London-based head of foreign-exchange strategy, wrote in a report today.

The dollar’s decline this year has buoyed commodities, doubling the price of copper and sugar. Today, industrial metals slid on concern that construction and manufacturing demand is set to slow. Copper dropped $135 a metric ton to $6,420 a ton on the London Metal Exchange.

Oil, Gold

Crude oil for December delivery fell 0.9 percent to $77.44 a barrel on the New York Mercantile Exchange before a report forecast to show rising crude inventories. The American Petroleum Institute and U.S. Energy Department will publish weekly reports on oil inventories later today and tomorrow, respectively.

Gold for December delivery in New York rallied $8.20 an ounce, or 0.8 percent, to $1,062.20 as the Reserve Bank of India purchased 200 tons of the metal from the International Monetary Fund. The IMF, currently offering 403.3 tons of gold, said it was ready to sell directly to central banks and later make transactions on the open market if necessary.

Government bonds rose, with the yield on the 10-year Treasury note falling 3 basis points to 3.39 percent, as declining stocks sapped demand for fixed income. The German bund yield also dropped 3 basis points, to 3.20 percent.

Government Borrowing

The Treasury Department cut its estimate for government borrowing in the current quarter by 43 percent yesterday, largely because of reductions in a program for helping the Fed manage its balance sheet.

The cost of protecting European corporate bonds from default rose for a third day, with credit-default swaps on the Markit iTraxx Crossover Index of 50 mostly sub-investment grade companies climbing 14.25 basis points to 541.25, according to JPMorgan Chase & Co.

To contact the reporters on this story: Daniel Hauck in London at dhauck1@bloomberg.net.

Last Updated: November 3, 2009 08:01 EST