LONDON (MarketWatch) -- Europe stocks dropped in early action Friday with worries about the economy back to the fore after Thursday's data showing U.S. house prices dropping to a 10-year low and a Citigroup note saying Britain will fall into a recession during the second half of the year. Financials led the downturn, with even HBOS , the subject of a report that J.P. Morgan Chase was looking to break it up, falling 3.2% in early action. Rentokil Initial shares dropped 28% followed a profit warning in the first quarter with one in the second. The U.K. FTSE 100 fell 0.7% to 5,324, the German DAX 30 dropped 0.8% to 6,389 and the French CAC 40 fell 0.8% to 4,311.

Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.

HONG KONG (MarketWatch) -- Honda Motor Co. Friday said its fiscal first-quarter profit grew at a surprisingly strong 8.1% from the year-ago period as it was able to reduce sales incentives in North America and cut costs. Net income jumped to 179.6 billion yen ($1.69 billion), way ahead of estimates, even as quarterly revenue fell 2.2% to 2.87 trillion yen ($26.94 billion) on a stronger yen. Analysts expected a net income of 115.47 billion yen, according to FactSet Research. For the year ending March 31, 2009, Honda expects net income to drop 18.3% to 490 billion yen on a modest 1.1% increase in sales to 12.13 trillion yen. Honda shares fell 2.1% in Tokyo, before the results were announced.

Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.

LONDON (MarketWatch) -- U.K. specialist insurance firm Beazley Group said Friday that its first-half net profit fell 23% to 32.1 million pounds ($63.6 million) as net premiums fell 10% to 292.3 million pounds. The insurer said its combined ratio remained steady at 90% -- a reading of above 100% means payouts exceeded premiums. Profit, however, was hurt by a weaker investment performance in the period, with annualized returns down to 1.7% from 5.2%. Premium rates are also down 8% in the first six months of the year as they continue to fall from the record highs set in 2006.

Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.

LONDON (MarketWatch) -- Citigroup downgraded British bank Lloyds TSB to hold from buy as it expects the U.K. to fall into a recession in the second half of 2008. It cut earnings estimates by at least 40% on Royal Bank of Scotland , Alliance & Leicester , HBOS and Barclays and retained sell ratings on HBOS and Barclays.

Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.

LONDON (MarketWatch) -- SkyTerra Communications Inc. and U.S. hedge fund Harbinger Capital Partners said Friday that they intend to make an offer to acquire satellite communications group Inmarsat on terms that will be announced once they've received regulatory approval. Harbinger said earlier in July it had made a preliminary approach to Inmarsat, though talks were subsequently halted. Harbinger, which owns 48% of SkyTerra and is also Inmarsat's biggest shareholder, said it expects regulatory approval will take 12 to 18 months to obtain. Assuming a successful conclusion to the regulatory process, Harbinger said it intends to enter negotiations with Inmarsat's board over the terms of a deal.

Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.