Sept. 5 (Bloomberg) -- U.S. stock-index futures followed European and Asian shares lower on concern the increase in borrowing costs caused by the collapse of American subprime mortgages will hurt banks' earnings.

Citigroup Inc. led a drop by lenders before the open of U.S. exchanges. Bradford & Bingley Plc paced a decline in Europe after Lehman Brothers Holdings Inc. cut its recommendation on shares of the U.K. mortgage lender, saying rising loan costs may erode earnings. Mizuho Financial Group Inc., Japan's second-biggest bank, fell after the country's chief financial regulator said he will monitor banks' credit-market losses.

The Morgan Stanley Capital International World Index lost 0.4 percent to 1,566.12 as of 9:14 a.m. in New York. Standard & Poor's 500 Index futures slipped 0.7 percent to 1,479.50.

``I am negative about the outlook for stocks and would not buy right now,'' said Alejandro Velasco, who helps manage $530 million at Banca Privada D'Andorra in Andorra. ``What worries me most is the upcoming earnings season. We still have not seen all the problems from subprime, failed debt investments and other issues.''

The overnight deposit rate for euros rose to a six-year high, prompting calls for the European Central Bank to supply more cash. The Bank of England held a regular fine-tuning money market operation today, offering twice as much money as last month amid concern about rising credit costs. The two central banks are scheduled to decide on interest rates tomorrow.

Money-market rates are ``the first barometer of the crisis,'' said Roland Lescure, chief investment officer at Groupama Asset Management in Paris, which oversees $120 billion. ``It reflects the lack of confidence of financial institutions. We don't yet know the impact on banks' earnings.''

Stoxx 600, Nikkei

Europe's Dow Jones Stoxx 600 Index fell 0.9 percent to 376.13. Germany's DAX Index lost 0.8 percent, while France's CAC 40 slipped 1.1 percent. The U.K.'s FTSE 100 decreased 0.8 percent.

Japan's Nikkei 225 Stock Average dropped 1.6 percent to 16,158.45. Markets also fell in Australia, South Korea, Taiwan, Indonesia and Vietnam.

Citigroup, the biggest U.S. bank, lost 72 cents to $46.49.

Mattel Inc. slipped 96 cents to $21.01. The world's largest toymaker announced its third recall in five weeks after finding about 848,000 Chinese-made Barbie and Fisher-Price products with paint that may contain excessive levels of lead.

Bradford & Bingley decreased 4.1 percent to 367.25 pence. The provider of about one in five loans to U.K. landlords was cut to ``underweight'' from ``overweight'' at Lehman Brothers.

``Uncertainties in asset-backed markets and rising wholesale funding costs are likely to affect earnings within the sector and specifically at Bradford and Bingley,'' the analysts wrote.

Societe Generale SA, France's third-largest bank, slid 2.6 percent to 118.77 euros. Northern Rock Plc, the worst performing U.K. bank stock this year, sank 3.3 percent to 708 pence. Lehman reduced its recommendation on shares of both banks to ``underweight'' from ``equal weight.''

Japan's Financial Regulator

Mizuho Financial Group declined 2.4 percent to 702,000 yen, the most since Aug. 17. Sumitomo Mitsui Financial Group Inc., Japan's third-largest bank, dropped 1.5 percent to 872,000 yen, its lowest since September 2005.

Japan's chief financial regulator Yoshimi Watanabe said the government is watching finance companies' half-year earnings for any losses related to the U.S. subprime mortgage crisis.

Michelin, Vedanta

Michelin & Cie. fell 2.4 percent to 91.66 euros. Rubber futures in Tokyo rose to the highest in four weeks. The contract for February delivery on the Tokyo Commodity Exchange climbed to as much as 253.3 yen a kilogram ($2,183 a metric ton), the highest since Aug. 9.

Vedanta Resources Plc climbed 4.5 percent to 1,872 pence. Shares of India's largest producer of copper and zinc rose to a record in London trading after Merrill Lynch & Co. added the stock to its ``Europe 1'' list.

Anglo Irish Bank Plc added 1.8 percent to 14.40 euros. The country's third-largest lender by market value said earnings for the year ending in September will exceed analysts' estimates as it increases lending.

Crude oil traded near a four-week high in New York as rising U.S. share prices bolstered investor confidence in economic growth. The contract for October delivery fell 1 cent to $75.07 on the New York Mercantile Exchange.

Statoil ASA gained 2.2 percent to 175 kroner. Citigroup Inc. upgraded shares of Norway's largest oil and gas company to ``buy'' from ``sell.'' Citigroup raised its price estimate by 15 percent to 195 kroner.

To contact the reporters on this story: Adria Cimino in Paris at acimino1@bloomberg.net; Eric Martin in New York at emartin21@bloomberg.net.

Last Updated: September 5, 2007 09:23 EDT