European Stocks, U.S. Futures Drop on Debt Concern

European stocks and U.S. futures index fell amid growing concern about the debt crisis in Europe and China's measures to cool inflation, while tensions between North and South Korea increased. Asian stocks also fell.

Banco Santander SA fell 4.3 percent, the rate of a sell-off in Spanish lenders. Rio Tinto Group fell 3.1 percent, stocks lower resource base. Actelion Ltd. lost 2.4 percent as UBS AG downgraded the shares of Swiss pharmaceutical company. Givaudan SA, Luxottica Group SpA and Puma AG each fell more than 1.5 percent of Morgan Stanley recommends that investors reduce their holdings of the three populations.

The benchmark Stoxx Europe 600 Index fell 1.1 percent to 264.85 at 12:35 pm in London. The meter is headed for a third week of declines as investors speculated that the region can not contain its sovereign debt crisis. 500 of Standard & Poor's Index lost 1 percent before reopening the U.S. market after the feast of Thanksgiving yesterday.

"There is a combination of negative news that is loaded to the market today," said Christian Falkner, an analyst at Alfa Wertpapierhandels AG in Frankfurt. "On one hand, the statements of Kim Jong Il on the possibility of war in Korea and speculation, moreover, that Portugal can be urged to take advantage of the Stability Fund. Investors are also worried about inflation in China. Financial stocks were especially hurt today. "

Rallies VStoxx

VStoxx Index, which measures the cost of protecting against a decline of contributions in the Euro Stoxx 50 rose 12 percent to 28.36. The indicator is aimed at an increase of 29 percent this week, the biggest gain since May.

The MSCI Asia Pacific Index fell 1.2 percent in North Korea warned that the military exercises in South Korea to the U.S. Peninsula will have the "brink of war," according to state news agency KCNA. North Korea threatened a "rain of fire terrible" that the U.S. and South Korea to violate its sovereignty.

explosive shots coming from the direction of North Korea, were heard in South Korea Yeonpyeong Island at about 15:10 today, a spokesman for South Korea's Joint Chiefs of Staff who requested anonymity, citing military policy. The Army is investigating, he said.

South Korea may appoint a new defense minister today after Kim Tae Young resigned following shelling of North Korea in the territory of the South for the first time in half a century this week.

China's inflation

Chinese stocks fell for the first time in three days, led by banks and developers after Shanghai Securities News said the government can reduce the rate of new loans next year.

Chinese policy makers have stepped up measures in recent weeks to curb inflation that reached 4.4 percent last month, the fastest pace in two years. The nine banks analysts surveyed by our reportes last week predicted the central bank will increase borrowing costs for the second time later this year.

The cost of insuring the debt of the Portuguese and Spanish government against default rose to record levels based on closing prices, according to data provider CMA. Swaps credit-default in Portugal increased 13 basis points to 489, and contracts in Spain rose 3.5 basis points to 303.

Portuguese Finance Minister Fernando Teixeira dos Santos said that EU governments can not impose a rescue plan in his country even when speculation mounted that Portugal will eventually have to request one.

Avoid rescue

By putting pressure on the Portuguese government, the European Central Bank and the countries monetary union in order to avoid a bailout of Spain, Financial Times Deutschland, citing unidentified people within the Ministry of Finance of Germany. Portugal faces a final vote in parliament today on its 2011 spending plan that includes measures to cut its deficit.

Nouriel Roubini, professor at New York University who predicted the global financial crisis, sees a 35 percent chance that Greece will leave the euro, with the possibility to increase over the next five years, Austria Format magazine, citing a interview.

National benchmarks fell in all 18 western European markets except Iceland. Britain's FTSE 100 Index lost 1.4 percent and Germany's DAX, the index fell 1.3 percent, while France's CAC 40 retreated 1.7 percent rate. IBEX 35, Spain fell 2.4 percent.

Banks decline

An indicator of banking shares fell 2.7 percent, the worst performance among 19 industry groups in the Stoxx 600. Santander, Spain's biggest bank, fell 4.3 percent to 7.48 euros. Banco Bilbao Vizcaya Argentaria SA lost 4.1 percent to 7.43 euros. BNP Paribas SA, France's biggest bank, fell 4.6 percent to € 47.54, extending the longest streak in nearly two months fall.

Lloyds Banking Group Plc, the largest UK mortgage lender, fell 4.9 percent to 61.56 pence, the biggest drop in the Stoxx 600. Royal Bank of Scotland Group Plc fell 4.8 percent to 38.89 pence.

Bank of Ireland, Ireland's largest bank, slid 3.1 percent to 24.8 cents, extending its weekly decline of 48 percent, the highest since January 2009.

Rio Tinto Group slid 3.1 percent to 4,138.5 pence, even after the world's third largest mining company said its iron ore unit will increase production by 50 percent over five years. One indicator of the basic industries of resources was one of the worst performers in the Stoxx 600, falling 2.1 percent. BHP Billiton Ltd., the world's largest mining company, retreated 2.6 percent to 2,292 pence, base metal prices fell in London.

Vedanta Resources Plc fell 4.3 percent to 2,051 pence. Standard & Poor's could lower your credit score from the mining company controlled by billionaire Anil Agarwal, if its proposed acquisition of a controlling stake in Cairn India Ltd. is approved.

Actelion, Daily Mail

Actelion, the manufacturer of drugs that may attract a takeover bid by Amgen Inc., lost 2.4 percent to 53.65 Swiss francs, UBS cut its rating on the shares to "neutral" from "buy." The stock has risen 36 percent since Sept. 30.

Daily Mail & General Trust Plc fell 1.1 percent to 538.5 pence. The stock, which plunged 3.5 percent yesterday after reporting sales that missed estimates, cut to "neutral" from "buy" at UBS.

Puma, the sporting goods maker controlled by PPR SA, fell 3 percent to 230 euros. Givaudan, the world's largest manufacturer of flavors and fragrances, fell 1.7 percent to 1,015 francs. Luxottica, which owns Ray-Ban and Oakley sunglasses, fell 1.6 percent to € 20.59. The three stocks were downgraded to "weight" by Morgan Stanley.

Inditex, Kingfisher

Inditex, owner of the Zara and Massimo Dutti, fell 3.2 percent to € 57.96 and Bank of America Merrill Lynch Global Research downgraded the stock to "neutral" from "buy."

Kingfisher, Europe's largest home improvement retailer, fell 2.3 percent to 243.8 pence after being cut to "underperform" from "neutral" by the brokerage.

Technip SA, Europe's second largest provider of oilfield services, fell 2.5 percent to € 61.28. The stock was reduced to "equal weight" from "overweight" by Morgan Stanley.

Porsche lost 4.4 percent to € 56.67, the biggest decline in more than two weeks. The automaker rose for seven consecutive days, adding 27 percent.

Sky Deutschland AG rose 4.2 percent to 1.57 euros at Morgan Stanley raised its rating on the stock to "overweight."