U.S. Futures, Europe Stocks Fall; GM Tumbles, Toyota Advances

By Sarah Jones

April 1 (Bloomberg) -- U.S. stock futures and European shares slid after people familiar with the matter said the U.S. government believes bankruptcy is the most likely option for General Motors Corp. and Chrysler LLC. Asian indexes gained.

GM slumped 4.1 percent in Germany. President Barack Obama believes a quick, negotiated bankruptcy is the most likely way for the automaker to restructure, according to members of Congress who were briefed on the situation. Honda Motor Co. and Toyota Motor Corp. climbed more than 5 percent on speculation Japanese automakers will benefit if GM and Chrysler go bankrupt. BP Plc slid 1.9 percent as Goldman Sachs Group Inc. recommended selling the shares.

Standard & Poor’s 500 Index futures dropped 0.8 percent at 8:14 a.m. in London, indicating the benchmark index for U.S. equities will retreat after its biggest monthly gain since 2002. The S&P 500 has climbed 18 percent since March 9 as banks from Citigroup Inc. to Bank of America Corp. said they made money in the first two months of 2009 and U.S. Treasury Secretary Timothy Geithner unveiled plans to rid lenders of toxic assets.

Obama is also prepared to let Chrysler go bankrupt and be sold off piecemeal if the automaker can’t form an alliance with Fiat SpA, said members of Congress who were briefed on the situation. The Institute for Supply Management’s factory index will probably show today that U.S. manufacturing shrank further in March.

Europe’s Dow Jones Stoxx 600 Index slipped 0.7 percent following its first monthly gain since August. Europe’s regional gauge still lost 11 percent last quarter.

GM, Obama

GM tumbled 4.1 percent to $1.86 in Germany. The “quick and surgical” bankruptcy Obama’s administration said was an option for GM and Chrysler appears to be inevitable, said the members of Congress and two other people familiar with the matter.

Obama arrived in London last night for a summit among leaders of the biggest economies with the aim of overcoming signs of discord in dealing with the global financial crisis.

The president’s agenda for the Group of 20 meetings is to coordinate a response to the recession by spurring growth and coming up with an overhaul of market regulations to include hedge funds, derivatives trading, executive pay and excessive risk-taking by financial firms.

BP slid 1.9 percent to 462.75 pence. Goldman Sachs downgraded Europe’s second-largest oil company to “sell” from “neutral,” citing “structural production decline” in 2010.

BHP Billiton Ltd. declined 1.7 percent to 1,361 pence. Morgan Stanley downgraded the world’s biggest mining company to “underweight” from “equal-weight.” Morgan Stanley also lowered its recommendation for Antofagasta Plc to “equal- weight” from “overweight.”

Asian Shares Rally

Asian stocks rose for the first time in three days today as investors speculated Japanese and South Korean automakers will benefit from the possible bankruptcy of GM and Chrysler.

Honda, which generates 51 percent of its sales in North America, climbed 6.7 percent to 2,470 yen. Toyota, the world’s largest automaker, jumped 5.1 percent to 3,280 yen.

The ouster of GM and Citigroup from News Corp.’s global stock index is leading to calls for Rupert Murdoch’s company to also remove them from the 112-year-old Dow Jones Industrial Average.

GM and Citigroup were dropped from the 150-stock Global Dow today after “extraordinary market conditions” pushed down the shares more than 88 percent in the past year, News Corp. said in a March 27 press release. They are among five stocks in the 30- company Dow industrials that closed below $10 this year.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.