LONDON » Stocks in Europe, Brazil and Canada fell on speculation government efforts to shore up the financial industry will fail to stem the deepening global recession.

Royal Bank of Scotland Group Plc slumped 67 percent after saying it expects to post a loss of as much as 28 billion pounds ($41 billion) for 2008 and the government got ready to raise its stake in the lender.

BASF SE dropped 4.6 percent as the largest chemical producer said demand deteriorated “;significantly.”; Futures on the Standard & Poor's 500 Index decreased 0.8 percent in New York. Stock markets were closed yesterday for the Martin Luther King Jr. holiday.

Europe's Dow Jones Stoxx 600 Index slid 1.7 percent to 189.72, extending the measure's 11 percent tumble during the past nine days as companies from Deutsche Bank AG to Alcoa Inc. fueled concern the global recession will wipe out profit growth. The U.K. government said it will guarantee toxic bank assets and gave the Bank of England unprecedented power to buy securities.

“;I don't agree it is addressing the problem,”; said Roger Nightingale, who helps oversee about $1.1 billion as London-based strategist at Pointon York Ltd. “;I have grave doubts that the policies pursued by this government are going to help in the medium to longer term,”; he told Bloomberg Television.

The euro-area economy will shrink 1.9 percent this year, the first time since the currency was introduced a decade ago, the European Commission said today. The European Central Bank last month predicted a 0.5 percent contraction for 2009.

National benchmark indexes fell in all 18 western European markets. Germany's DAX dropped 1.2 percent, while the U.K.'s FTSE 100 slipped 0.9 percent. Spain's IBEX 35 tumbled 1.5 percent, led by Banco Santander SA.

Spain had its AAA sovereign credit rating removed by Standard & Poor's in the second downgrade of a euro-region government in five days, as the country's first recession in 15 years swelled the budget deficit. Greece's rating was cut one step to A- on Jan. 14.

Dow Jones Industrial Average futures fell 0.2 percent, as did Nasdaq-100 futures. Billionaire Warren Buffett, chairman of Berkshire Hathaway Inc. and one of the world's most successful investors, said the U.S. has been struck by an “;economic Pearl Harbor,”; according to remarks aired on Dateline NBC Sunday.

Brazil's Bovespa Index sank 1.3 percent, led by Lojas Renner SA and Metalurgica Gerdau SA. Canada's Standard & Poor's/TSX Composite Index lost 0.9 percent as Royal Bank of Canada declined. Asia's MSCI Asia Pacific Index rose 0.4 percent.

Crude oil slid below $35 a barrel in electronic trading on the New York Mercantile Exchange and gold fell in London.