European Stocks, U.S. Futures Slump on Concern Greek Default May Be Close

European and Asian stocks slumped and U.S. index futures retreated as speculation mounted that Germany is preparing for Greece to default.

BNP Paribas SA, Societe Generale SA and Credit Agricole SA (ACA) slid more than 9 percent after two people with knowledge of the matter said Moody’s Investors Service may cut the banks’ ratings because of their Greek holdings. Royal Bank of Scotland Group Plc (RBS) and Barclays Plc (BARC) fell as Britain’s banking commission recommended firewalls around retail-bank operations that would cost as much as 7 billion pounds ($11 billion).

The Stoxx Europe 600 Index lost 2.3 percent to 219.45 at 10:23 a.m. in London, plunging to its lowest level since July 2009. Futures contracts on the Standard & Poor’s 500 Index expiring in December retreated 1.7 percent and the MSCI Asia Pacific Index slid 2.3 percent.

“Major equity markets remain laced with fear and uncertainty over the lack of any resolution to the ongoing crisis,” said James Hughes, a senior market analyst at Alpari Ltd. in London.

Officials in Chancellor Angela Merkel’s government in Germany are debating how to shore up German banks should Greece fail to meet the budget-cutting terms of its aid package, three coalition officials said on Sept. 9. BNP Paribas (BNP), Societe Generale and Credit Agricole may have their ratings cut by Moody’s this week because of their holdings of the Mediterranean nation’s debt, two people with knowledge of the matter said.

Greek Budget Cuts
Prime Minister George Papandreou, vowing to avoid a default and keep Greece in the euro, approved new measures yesterday to help plug a budget gap as resistance builds at home and in Europe to extending more aid to the European Union’s most- indebted nation.

“Capital preservation is the main consideration right now,” said Fredrik Nerbrand, the head of global asset allocation at HSBC Holdings Plc in London, in a Bloomberg Television interview with Owen Thomas. “This is still an environment that is highly uncertain. Owning risk is not really top of my agenda.”

Societe Generale (GLE) slid 9.7 percent to 15.75 euros. BNP Paribas tumbled 12 percent to 26.35 euros and Credit Agricole plunged 10 percent to 4.86 euros.

French banks top the list of Greek creditors with $56.7 billion in overall exposure to private and public debt, according to a June report by the Basel, Switzerland-based Bank for International Settlements. Moody’s placed the three banks’ ratings on review in June to examine “the potential for inconsistency between the impact of a possible Greek default or restructuring and current rating levels,” the rating company said at the time.

Bank Capitalization Plans
In the U.K., plans to strengthen Britain’s consumer banks may cost as much as 7 billion pounds to implement, a government- appointed commission said in a report today. The lenders will have until 2019 to implement the proposals, the report said.

Barclays slid 2.2 percent to 140.9 pence and RBS lost 0.8 percent to 21.3 pence.

The Stoxx 600 extended last week’s 3.7 percent slide, bringing its slump from this year’s peak on Feb. 17 to 25 percent, as economic data from the U.S. and Europe trailed forecasts and Standard & Poor’s downgraded America’s AAA sovereign-debt rating. The retreat has dragged the price- earnings ratio on the gauge to 9.1 times the estimated profits of its constituent companies, the lowest valuation since March 2009, according to data compiled by Bloomberg.

Charter International Plc (CHTR) rallied 5.6 percent to 849 pence after Colfax Corp. (CFX)’s U.K. unit said the company agreed to buy the U.K. engineering business for about 1.53 billion pounds.