European stocks and U.S. futures fell and the cost of insuring against corporate defaults rose as the possibility of General Motors Corp. and Chrysler LLC filing for bankruptcy increased and Group of 20 leaders struggled to revive economies. Europe’s Dow Jones Stoxx 600 Index slipped 0.3 percent after its biggest monthly gain in 11 months, while futures on the Standard & Poor’s 500 Index retreated 0.8 percent. Crude oil and metals prices declined. “Risk aversion again crept into markets,” Todd Elmer and Jim McCormick, foreign-exchange strategists at Citigroup Inc., wrote in a research report today. “The main focus appears to be the futures of GM and Chrysler, as the Obama administration hinted that a controlled bankruptcy looks increasingly likely.” Oil fell 2.4 percent to $48.45 a barrel in New York amid concern the failure of GM and Chrysler will add to the U.S. manufacturing and employment slump. Copper dropped 0.6 percent after China’s manufacturing shrank for an eighth straight month. President Barack Obama met with U.K. Prime Minister Gordon Brown in London today before the G-20 summit with the global economy mired in its first recession since World War II. Obama believes a quick, negotiated bankruptcy is the most likely way for Detroit-based GM to restructure and is also prepared to let Auburn Hills, Michigan-based Chrysler fail, people familiar with the situation said. ‘Signify a Change’ “We’re going to be surprised if anything comes out of the G-20,” said Steve Major, HSBC Holdings Plc’s head of fixed- income strategy in London. “The GM-Chrysler development and the words coming out of the U.S., particularly from Obama and people close to him, seem to signify a change.” The Institute for Supply Management’s factory index may show U.S. manufacturing shrank in March, according to estimates in a Bloomberg News survey. A report from ADP Employer Services may show companies cut more than 600,000 jobs for a fourth month. The yen was little changed at 98.99 per dollar in London, from 98.96 in New York yesterday. The dollar appreciated to $1.3241 per euro from $1.3250. U.K. 10-year gilts erased declines after the Treasury sold 3.5 billion pounds ($5 billion) of six-year notes, with investors bidding for 2.23 times the securities offered. The government also plans to sell 30-year bonds tomorrow following last week’s failed auction, when it was unable to attract enough bids for the first time in seven years. The risk of unsuccessful sales increased as governments around the world boosted spending to revive their economies after financial institutions incurred almost $1.3 trillion of losses and writedowns since the start of 2007. ‘Bad Time’ The 30-year sale “comes at a bad time and a bad part of the curve,” said Peter Chatwell, a fixed-income strategist in London at Calyon, the investment-banking arm of Credit Agricole SA. “I don’t see a reason why it should be very strong.” Credit-default swaps on the Markit iTraxx Crossover Index of 45 companies with mostly high-risk, high-yield credit ratings rose 13 basis points to 960, according to JPMorgan Chase & Co. prices at 11:47 a.m. in London. The contracts protect bondholders against default and pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase in the swaps signals a deterioration in the perception of credit quality. Standard & Poor’s cut its ratings on hybrid capital securities issued by more than 60 European financial institutions yesterday on concern deteriorating prospects for banks will prompt governments to encourage or force borrowers to suspend payments on the debt.

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