European Stocks Fluctuate as U.S. Debt Talks Continue

European stocks fluctuated between gains and losses as investors awaited developments in talks on raising the U.S. debt limit and restoring government operations. U.S. index futures and Asian shares declined.

Dassault Systemes SA, a French maker of design software, sank the most in two years as revenue missed its forecasts. Konecranes Oyj slid 4.9 percent as the Finnish maker of lifting equipment cut its outlook. PSA Peugeot (UG) Citroen tumbled the most in four years on a report it plans to sell new shares. Electricite de France SA rose 2.3 percent as the U.K. said it’s close to announcing a deal to build a nuclear power plant.

The Stoxx Europe 600 Index slipped less than 0.1 percent to 311.44 at 10:57 a.m. in London. The gauge has advanced 0.3 percent in October even as U.S. lawmakers failed to agree on a budget, forcing the first partial government shutdown in 17 years. The world’s biggest economy will exhaust its borrowing authority on Thursday without action by Congress to raise the debt limit.

“Everyone expects the issue to be solved at the 11th hour, but no one knows when the 11th hour will be,” Witold Bahrke, who helps oversee $55 billion as a senior strategist at PFA Asset Management in Copenhagen, said by phone. “We are seeing a dysfunctional U.S. government, which is creating uncertainty.”

Standard & Poor’s 500 Index futures dropped 0.7 percent today and the MSCI Asia Pacific excluding Japan Index retreated 0.2 percent. Equity markets in Japan and Hong Kong are closed for holidays. U.S. bond markets are shut for Columbus Day, while the stock market is open.

Debt Talks

U.S. Senate Majority Leader Harry Reid said yesterday that he had a “productive conversation” with Minority Leader Mitch McConnell without reaching a conclusion on a plan to send to the chamber for a vote. Senate Republicans have blocked a Democratic plan to push the next debt-limit fight into 2015 and Senate Democrats rejected a proposal from Republican Senator Susan Collins of Maine.

Collins’s group of moderate senators trying to frame a deal will probably meet again today, said a Senate Democratic aide with knowledge of the negotiations. The House of Representatives plans to reconvene at noon in Washington, with the Senate meeting from 2 p.m.

“Market participants last week had the expectation that we will see an agreement over the weekend,” Soeren Steinert, who helps manage about $24 billion as associate director for equities trading at Quoniam Asset Management GmbH in Frankfurt, said by telephone. “That failed to happen, which leads to uncertainty and pressure on stock prices.”

Chinese Exports

China’s exports unexpectedly fell in September. Overseas shipments dropped 0.3 percent from a year earlier, the General Administration of Customs said in Beijing on Oct. 12, trailing all 46 estimates in a Bloomberg survey that had a median projection for a 5.5 percent gain. The slowdown resulted from a high basis of comparison with last year, the agency said.

The Stoxx 600 has rallied 11 percent in 2013 as the euro area emerged from a recession and central banks maintained stimulus measures to support the global economy.

The volume of shares changing hands in Stoxx 600 companies today was 23 percent less than the 30-day average, according to data compiled by Bloomberg. The VStoxx Index, a gauge of volatility implied by the options market, climbed 7.7 percent to 19.67.

Dassault declined 6.1 percent to 90.55 euros, the largest slide since August 2011. Revenue in the third quarter, excluding currency effects, rose 4 percent, falling short of targeted growth of 8 percent to 9 percent, according to a company statement.

Konecranes Sinks

Konecranes lost 4.9 percent to 23.13 euros in Helsinki as the company forecast that 2013 sales will be “slightly lower” than last year.

Peugeot plunged 10 percent to 11.08 euros, the biggest decline since April 2009. The carmaker is preparing to sell 3 billion euros ($4.1 billion) of new stock, with China’s Dongfeng Motor Corp. and the French government buying matching stakes in Europe’s second-biggest carmaker, Reuters reported, citing three unidentified people.

Ericsson AB, the largest maker of wireless-network equipment, retreated 2.3 percent to 82.80 kronor. Barclays Plc downgraded the shares to underweight, similar to a sell recommendation, from equal weight, saying third-quarter earnings may disappoint.

EDF Climbs

EDF (EDF) advanced 2.3 percent to 25.07 euros as Energy Secretary Ed Davey said the U.K. is “extremely close” to announcing a deal with Europe’s biggest power generator to build Britain’s first nuclear power station since 1995. The agreement may be announced as soon as this week after two or three remaining issues are resolved, said a U.K. government official briefed on the talks.

Johnson Matthey, the U.K. platinum refiner and producer of autocatalysts, climbed 4.3 percent to 2,941 pence in London as JPMorgan Chase & Co. upgraded the shares to overweight, similar to a buy rating.

“Johnson Matthey is at an inflection point,” Martin Evans, an analyst at JPMorgan, wrote in a report. “We expect years of investment in the industrial catalyst market to lead to accelerated growth, benefiting from the swathe of new customer capex driven by Chinese petrochemical self-sustainability and the U.S. shale-gas revolution.”

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

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

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