European Stocks Drop on EFSF Bond Sale Delay

By Peter Levring - Nov 2, 2011 6:30 PM GMT+0700

European stocks erased their decline as automakers and basic-resources companies advanced. Asian shares fell while U.S. index futures gained.

The Stoxx Europe 600 Index rose less than 0.1 percent to 235.21 at 11:28 a.m. in London, having earlier lost 0.7 percent. The gauge had retreated 5.8 percent over the previous three days as Greece called a referendum on its latest bailout package, spurring concern that the country may default.

The MSCI Asia Pacific Index added 0.6 percent, while futures on the Standard & Poor’s 500 Index rose 0.4 percent.

Euro-area leaders, racing to prevent their week-old debt crisis strategy from unraveling, are holding emergency talks today to tell Greece there is no alternative to the budget cuts imposed in the bailout plan.

Greek Prime Minister George Papandreou was summoned to Cannes on the eve of a Group of 20 summit where he will hear from French President Nicolas Sarkozy that the “only way to resolve Greek debt problems” is through a deal hammered out last week in a six-day crisis-management marathon.

The region’s rescue fund, the European Financial Stability Facility, will delay its planned 3 billion-euro bond sale because of market conditions, according to two people with knowledge of the deal.

European Economy

Europe’s manufacturing industry contracted for a third month in October, adding to signs the euro-area economy is edging toward a recession. A gauge based on a survey of purchasing managers in the 17-nation euro region fell to 47.1 from 48.5 in September, London-based Markit Economics said today. That’s below an initial estimate of 47.3 published on Oct. 24. A reading less than 50 indicates contraction.

Federal Reserve officials are probably engineering a further round of large-scale asset purchases, while they are unlikely to announce a decision today, according to economists in a Bloomberg News survey. Sixty-nine percent say Chairman Ben S. Bernanke will embark on a third round of quantitative easing, with 36 percent predicting the move in the first quarter of next year, according to the poll of 42 economists from Oct. 26-31.

The Federal Open Market Committee plans to release a policy statement at 12:30 p.m. in Washington after a two-day meeting. The FOMC forecasts will be released at 2 p.m., and Bernanke is scheduled to hold a press conference beginning at 2:15 p.m.

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net