4 Min Read
LONDON (Reuters) - European shares and the euro fell on Tuesday, with investors increasingly edgy ahead of a finely balanced vote by Slovakia's parliament to ratify an expansion of the euro zone's rescue fund.
Slovakia is the last of the 17-member bloc yet to vote on a deal agreed by the region's leaders in July to boost the size and powers of the European Financial Stability Facility (EFSF).
All 17 euro zone states must ratify the EFSF expansion for it to come into effect. Three of the four parties in the center-right government in Slovakia want to ratify it but a fourth has threatened to vote against it.
Opposition parties could move to back the fund in a follow-up vote to any rejection, but even an initial failure by parliament to pass it would rattle markets and could bring an end to a rally in riskier assets like stocks, commodities and higher-yielding currencies.
The vote was expected to take place between 10 a.m. EDT and 11 a.m. EDT.
"The Slovakian vote is on a knife-edge. It could go either way. But (if they vote against) they can vote again, to get -- from the European perspective -- the right result. The market is thinking that they are holding out, and playing hardball," said Jeremy Batstone-Carr, strategist at Charles Stanley.
The FTSEurofirst 300 .FTEU3 index of top European shares was down 0.6 percent at 957.95 points, after rising 1.7 percent on Monday. Stocks were lower across the board, with the STOXX Europe 600 Basic Resources Index .SXPP among the biggest losers.
U.S. stock futures pointed to a lower start on Wall Street. The S&P futures was down 0.65 percent, while the Dow Jones industrial average futures was 0.6 percent lower. The U.S. markets were likely to take direction from some major earnings announcements later.
Earlier, Asian shares rose after China moved to support its stock market by buying shares of major banks.
The MSCI's All-Country World index .MIWD00000PUS was slightly lower and is still around 18 percent below a May high for the year.
It climbed back above the 20 percent loss level -- the rule-of-thumb definition for a bear market -- on Monday after a pledge from German and French leaders to come up with a plan by the end of the month to tackle Greece's confidence-sapping debt woes and recapitalize European banks.
The heart of market concerns in the euro zone crisis now is that sovereign debt losses will drive another round of financial sector turmoil to rival that in 2008. Banking stocks were down another 0.7 percent on Tuesday.
Speaking in his capacity as head of the European Systemic Risk Board (ESRB), European Central Bank President Jean-Claude Trichet said the debt crisis had become systemic and that a recapitalization of banks should happen quickly.
The euro was down 0.5 percent at $1.3587, after surging nearly 2 percent to just below $1.37 on Monday. The single currency also eased against the safe-haven yen to around 104.13. <FRX/>
The dollar rose 0.3 percent against a basket of currencies .DXY. The greenback and the yen usually gain during times of financial stress.
German Bunds edged higher with the December Bund futures 14 ticks higher at 134.76.
Spot gold was down 1 percent at $1,659.09 an ounce, having risen more than 2 percent on Monday.
Brent crude oil fell more than $1 to below $108 per barrel with traders closely watching oil exports from Kuwait, one of OPEC's top five producers, after a strike by a customs union shut ports and halted vessel traffic on Monday.
Additional reporting Brian Gorman, Neal Armstrong and Kirsten Donovan; Editing by Chris Pizzey