Oct. 19 (Bloomberg) -- Lot after lot by contemporary-art stars such as Takashi Murakami and Richard Prince failed to sell in London last night as Phillips de Pury & Co's auction raised less than a third of its expected total.

The 70-lot sale fetched 5 million pounds ($8.6 million) with fees, against a lower estimate of 18.6 million pounds. Forty-six percent of the lots failed to find buyers.

``It's a turning point,'' said Nicolai Frahm, a London-based art adviser. ``The estimates were fairly high and the financial markets are so tough at the moment.''

The contemporary-art market has enjoyed a bull run for the past five years, with prices for artists including Andy Warhol, Murakami and Prince more than quadrupling. The London contemporary-art auctions, coinciding with the Frieze Art Fair, are the first test of the market since governments bailed out banks, and stock markets crashed in the worst financial crisis since the Depression.

``The timing could not have been worse for an auction,'' said Michael McGinnis, worldwide director of contemporary art at Phillips. ``The economy is in a somber mood. There was a lot of interest but interest didn't turn into bids.''

Mercury Group, a Russian luxury retailer, this month bought a majority stake in Phillips for an undisclosed price.

The most dramatic moment came when Murakami's 21-foot-high Fiberglass sculpture ``Tongari-kun'' (2003-2004) failed to attract a single bid. It was expected to fetch at least 3.5 million pounds. The Japanese artist, clad in a black puffy jacket, attended the auction and laughed after the lot was passed in a hushed room.

Market Ripples

``Hundreds of billions of dollars got wiped out in the last month,'' said New York-based dealer and market veteran Tony Shafrazi. ``It creates ripples.''

Seated on rows of Philippe Starck chairs, bidders ignored works by leading American contemporary artists priced between 250,000 pounds and 500,000 pounds. Among the casualties were Lisa Yuskavage's 2003 oil-on-canvas work ``Dark Garden II,'' a 2001 joke painting by Prince and a pink acrylic work of blank advertising signs from 2004 by Ed Ruscha.

Not a single lot sold for 1 million pounds or more. None of the 10 top-selling works managed to achieve a hammer price above the higher estimate. The top lot, Warhol's ``Flowers'' (1964), fetched a mid-estimate 735,650 pounds, going to a telephone bidder.

``Cleaning the Pole,'' a sensual nude by Marlene Dumas, soon to be featured in a solo show at the Museum of Modern Art in New York, fetched 553,250 pounds, below its high estimate of 600,000 pounds.

Participation Lack

``All the buyers and collectors'' had visited the auction house and saw the works during the Frieze week, said Simon de Pury, Phillips's chairman. He attributed their lack of participation to the result of ``the events of the past few weeks.''

A brightly hued, 9-foot-high abstract expressionist painting by Joan Mitchell was another significant flop, with a presale- estimate range of between 2 million pounds and 3 million pounds.

The speculative demand that has recently boosted prices for Chinese contemporary art evaporated. A painting of a vacant-eyed boy by Zhang Xiaogang, titled ``Bloodlines Series: A Boy,'' (2002) failed to sell. So did a group of bronze smiling figures comprising ``Contemporary Terracotta Warriors No. 7'' (2005) by another Chinese-art star, Yue Minjun. They were estimated at 200,000 pounds to 300,000 pounds and 350,000 pounds to 450,000 pounds respectively.

London dealer John Austin said it was the worst-performing auction he'd seen since 1991.

``There's been an awful lot of speculation,'' he said. ``We've got to get back to the real market where people buy things because they really like them.''

Other Sales

The previous evening, Sotheby's contemporary-art sale in London missed its presale estimate as the auctioneers struggled to find buyers for many high-value works. That 62-lot sale fetched 22 million pounds with fees. Sotheby's had estimated that it would raise a total of between 30.6 million pounds and 42.8 million pounds.

Sotheby's shares dropped 21 cents, or 1.97 percent, to $10.44 in New York yesterday. The stock is down 72.6 percent this year.

Christie's International holds its London contemporary-art sale later this evening.

A survey of U.K. valuers said the Damien Hirst auction last month may have marked the top of the art market.

(Scott Reyburn and Katya Kazakina are reporters for Bloomberg News. The opinions expressed are their own.)

To contact the writers on the story: Katya Kazakina in London at kkazakina@bloomberg.net; Scott Reyburn in London at sreyburn@hotmail.com.

Last Updated: October 18, 2008 19:28 EDT