NEW YORK (Reuters) - U.S. and European stocks fell on Monday and the euro slipped, after Germany dashed hopes that the euro zone debt crisis would be resolved at next Sunday’s summit of European leaders.
A Group of 20 meeting of finance ministers in Paris this past weekend had raised expectations that European banks would be recapitalized and the region’s bailout fund expanded to deal with a potential debt default by Greece.
But Germany’s finance minister, Wolfgang Schaeuble, said on Monday that even though European governments would adopt a five-point platform to address the two-year-old crisis, a definitive solution would not be reached at the EU summit being held on October 23.
World stocks, as measured by the MSCI's all-country world equity index .MIWD00000PUS, fell 1 percent. On Wall Street, the major stocks indexes slid about 2 percent. In Europe the pan-European FTSEurofirst 300 index of top shares .FTEU3 closed down 1 percent at 966.04 points. The index had hit a 10-week high earlier in the session, before Schaeuble's comments turned sentiment.
Stocks recently had been on an upswing, with the MSCI having recovered from 15-month lows by more than 10 percent in the past nine days, on optimism that Europe was moving to take action to contain its debt crisis.
Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh, said the Germans on Monday were trying to downplay expectations, while a breather after such a strong rally in so few days was understandable.
“I am absolutely sure that we will get a pretty robust package in 10 days’ time,” said Milligan, speaking in New York. “But I think we will not get as much detail as we would like to see. ... It’s going to take some months before a number of the issues are sorted out.”
The Dow Jones industrial average .DJI was down 229.17 points, or 1.97 percent, at 11,415.32. The Standard & Poor's 500 Index .SPX was down 22.84 points, or 1.87 percent, at 1,201.74. The Nasdaq Composite Index .IXIC was down 53.71 points, or 2.01 percent, at 2,614.14.
Anxiety over Europe overshadowed a $21 billion deal by Kinder Morgan Inc (KMI.N) to buy rival El Paso Corp EP.N in a merger that would combine the two largest natural gas pipeline operators in North America.
El Paso’s shares surged nearly 25 percent to $24.53, and Kinder Morgan jumped 5.5 percent to $28.38.
The euro slid from a one-month high against the U.S. dollar touched earlier in the global session, falling 1.0 percent to $1.3746.
Government debt prices rose, with 10-year U.S. Treasuries gaining 23/32 in price to yield 2.17 percent. The 30-year U.S. Treasury bond gained two full points to yield 3.14 percent.
Brent crude settled down $2.07 at $110.16 a barrel, reversing earlier gains. U.S. crude settled down 42 cents at $86.38.
Gold fell after early gains, moving in tandem with lower equity markets and other commodities.
U.S. gold futures for December delivery settled down $6.40 at $1,676.60 an ounce.
Still, some investors said that EU leaders had made progress in moving to contain the sovereign debt, suggesting markets might rebound.
“Although there is still uncertainty surrounding what might ultimately come out of the euro zone, we are infinitely closer to something concrete than we were over the last several weeks,” said Brad Bechtel, managing director at Faros Trading LLC in Stamford, Connecticut.
Reporting by Chuck Mikolajczak, Gertrude Chavez-Dreyfuss and Nick Olivari in New York; Ikuko Kurahone and Joanne Frearson in London; Writing by Herbert Lash; Editing by Leslie Adler