By David Merritt May 20 (Bloomberg) -- European stocks rebounded after yesterday’s slide left valuations near the cheapest since 2008, and U.S. index futures fluctuated. The euro weakened while palladium extended its losing streak to the worst since July. The Stoxx Europe 600 Index gained 0.3 percent at 10:10 a.m. in London as Spain’s IBEX 35 rallied 1 percent. Futures on the Standard & Poor’s 500 Index were little changed. The euro fell against the dollar, trading near the lowest level in four years. The German bund yield advanced three basis points. Palladium fell 5.3 percent, extending its six-day slump to 20 percent. European finance officials meet in Brussels a day before the German parliament votes on the country’s share of a $1 trillion bailout to backstop the euro. Stocks plunged yesterday as Chancellor Angela Merkel’s unilateral effort to control what she called “destructive” markets rattled investors. The German ban on some bearish bets against financial companies and government bonds wasn’t replicated in other European states. “We are back in the risk on, risk off type of trading environment,” Lothar Mentel, the London-based chief investment officer for Octopus Investments Ltd., said in a Bloomberg Television interview. Investors “with a daily or weekly time horizon look at what sells off most when the markets go into turmoil, so what was off yesterday is back on today.” Four stocks gained for every one that fell on the Stoxx 600. Yesterday’s 3 percent plunge left the benchmark gauge trading at less than 15 times its companies’ reported earnings, near the lowest level since December 2008. Vienna Insurance Group, Austria’s largest insurer, surged 3.4 percent in Vienna after first-quarter profit topped estimates. Fiat SpA gained 2.3 percent in Milan as Royal Bank of Scotland Group Plc recommended Italy’s biggest automaker. Royal BAM Groep NV rallied 6.1 percent in Amsterdam after the biggest Dutch builder posted a 19 percent jump in first-quarter profit. Dubai Restructuring The MSCI Emerging Markets Index fell 1 percent as China’s Shanghai Composite Index slipped 1.2 percent and Korea’s KOSPI Index lost 1.8 percent. Dubai’s DFM General Index climbed 0.7 percent after creditors of Dubai World agreed to restructure $23.5 billion of liabilities as the state-owned holding company seeks to resolve a debt crisis that roiled global markets last year. U.S. futures fluctuated after the S&P 500 yesterday wiped out its gain for 2010. The Federal Reserve said it was in no hurry to sell mortgage assets as it raised its U.S. growth estimates for 2010 and lowered forecasts for unemployment and inflation, according to minutes of the Federal Open Market Committee meeting on April 27-28 released yesterday. Palladium Retreat The U.S. Conference Board’s measure of the economy’s outlook for the next three to six months probably climbed 0.2 percent last month, according to the median forecast in a Bloomberg survey of economists. The figures, due at 10:00 a.m. New York time, follow a 1.4 percent gain in March that was the most since a similar rise in May 2009. The Fed Bank of Philadelphia’s general economic index and initial jobless claims data are also due to be released today. Palladium, used in auto catalysts and jewelry, retreated $24.25 to $435.38 an ounce on concern that slower economic growth will sap demand for cars and consumer goods. Palladium had advanced as much as 39 percent this year, after more than doubling last year, as auto sales expanded and an exchange- traded fund backed by the metal was introduced. Platinum dropped 2.2 percent to $1,566.50 an ounce. Copper for delivery in three months rose 2.2 percent to $6,650 a metric ton on the London Metal Exchange, rebounding from yesterday’s 2.8 percent drop. Aluminum, nickel and zinc also advanced. Crude oil traded little changed around $70 a barrel in New York amid signs that U.S. demand is recovering. Spanish Auction The euro weakened 0.3 percent to $1.2384, near the lowest level since April 17, 2006. The yield on German 10-year bunds, Europe’s benchmark debt security, climbed to 2.79 percent. Spain sold 10-year bonds to yield 4.045 percent. That’s higher than the 3.855 percent yield at an auction two months ago and compares with an average of 3.869 percent at the previous four sales. The cost of protecting against a default on European corporate bonds fell, with credit-default swaps on the Markit iTraxx Crossover Index of 50 mostly high-yield companies declining 12 basis points to 564.5, according to JPMorgan Chase & Co. To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net

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