European Stocks Pare Gains as Germany Says No ‘New Bazooka’ for Euro Debt

By Sarah Jones - Nov 22, 2011 5:08 PM GMT+0700

European stocks pared their advance after Germany said that there is no “new bazooka” to combat the euro area’s debt crisis, offsetting rating companies reaffirmation of America’s creditworthiness. U.S. stock-index futures were little changed and Asian shares erased losses.

Antofagasta Plc (ANTO) led a rally in mining companies, both climbing 1 percent, as copper recouped some of yesterday’s losses. British Land Co. jumped 2.1 percent after analysts recommended buying the real-estate investment trust.

The benchmark Stoxx Europe 600 Index slipped 0.1 percent to 224.66 at 10:06 a.m. in London after tumbling 3.2 percent yesterday to its lowest level since Oct. 5. Futures on the Standard & Poor’s 500 Index expiring in December advanced 0.1 percent, while the MSCI Asia Pacific Index (MXAP) rose 0.1 percent, erasing losses of as much as 0.7 percent.

“This has the makings of another dead cat bounce,” said Terry Pratt, an institutional trader at IG Markets. “There’s still this double whammy of concerns -- the failure of the U.S. to reach a compromise over deficit reduction plans and the ongoing threat to global economic confidence by the euro zone’s sovereign-debt woes.”

Stocks slumped around the world yesterday amid signs U.S. lawmakers would fail to reach an agreement on budget cuts, increasing the likelihood that the world’s largest economy will face another credit downgrade. Banks tumbled as dollar funding costs and euro-area bond yields surged.

Automatic Spending Cuts

Standard & Poor’s and Moody’s Investors Service maintained their U.S. credit ratings after the close of European (SXXP) trading, even as Congress’s special debt-reduction committee failed to reach an agreement, setting the stage for $1.2 trillion in automatic spending cuts.

S&P reaffirmed it will keep its U.S. rating at AA+ after stripping the government of its top AAA grade on Aug. 5. Moody’s kept its AAA rating with a negative outlook. Fitch Ratings noted in a statement that it said in August that a supercommittee failure would probably result in a “negative rating action,” likely a revision of its outlook to negative, and that it will conclude a review by the end of this month.

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

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