European stocks fell as they corrected after the largest monthly growth since July 2009, as some investors again started to reluctantly buy stocks before Euro zone leaders had a chance to explain how they will pay for the expansion of the region’s rescue fund. Futures on American stock indexes and Asian shares also fell. Shares of HSBC Holdings Plc and BHP Billiton Ltd led the drop among shares of companies in the banking and commodity sectors. The Stoxx Europe 600 Index dropped 1.1% to 246.18 as of 10:32AM in London. The index closed with monthly growth of 8.8%, which is not bad considering it was the highest growth in over two years.
On October 28 last week, the European stock index underwent a 0.2% correction after 3.6% growth the previous day following Euro zone leaders announcing that they intended to increase the EFSF in an attempt to put a stop to the region’s debt crisis. In total, the index shot up 4.2% last week and ended its fifth straight week of growth. This is the reason why stock and forex brokers are finding ways to cope up with the situation.
Futures contracts on the Standard & Poor’s 500 Index with December maturities receded 0.9% from their closing levels on Friday, while the MSCI Asia Pacific Index fell 2.4%, marking the biggest drop in the past four weeks. This week, G-20 leaders will meet November 3-4 in Cannes. This will be the second time in the last 7 days that Europeans will meet with creditors after Euro zone authorities pledged to increase funds in the EFSF to 1 trillion Euros ($1.4 trillion). The Euro zone has already turned to China for financial aid and to the IMF for its cooperation.
Nevertheless, French presidential advisor Andre Gueno has refuted talks of offering more incentives to China in exchange for help in resolving the Euro zone debt crisis. DT Trading political analysts believe that the French presidential administration’s unwillingness to speak about such talks may indicate that China asked for a very high price in exchange for its assistance. It is also possible that the Chinese leadership is looking to get a share in European industrial assets, in particular, in the aerospace agency EADS.
The European Central Bank, under the leadership of new head Mario Draghi, will decide whether to change its interest rates this week. DT Trading analysts insist that there is a very small chance that Draghi will call for lowering the refinancing rate, which has already been raised to 1.5% this year, at his first meeting in his new position.