By Julie Cruz June 7 (Bloomberg) -- European stocks dropped, after U.S. equities closed last week at a four-month low, as concern lingered that the sovereign debt crisis will hold back the global recovery. Asian stocks tumbled and U.S futures were little changed. BHP Billiton Ltd. and Rio Tinto Group declined with metal prices. Barclays Plc and Lloyds Banking Group Plc led a retreat in bank stocks. Grifols SA fell 4.8 percent after agreeing to buy Talecris Biotherapeutics Holdings Corp. for $3.4 billion. Hellenic Telecommunications Organization SA slumped after announcing it will cut its dividend. The benchmark Stoxx Europe 600 Index fell 0.5 percent to 243.27 at 11:12 a.m. in London, after earlier losing as much as 1.7 percent. The gauge has retreated 11 percent from this year’s high on April 15, as credit rating downgrades for Spain, Portugal and Greece triggered concern some European nations will struggle to fund their deficits as the global economy rebounds from the worst recession since the Great Depression. “We face a problem of low growth or no growth in 2011 due to fiscal problems in European countries,” said Philipp Musil, who helps oversee $10 billion at Semper Constantia Privatbank AG in Vienna. “A deflation scenario is really possible, which is very toxic for the equity market. We have reduced our exposure to European equities to ‘neutral.’” Grave Situation The MSCI Asia Pacific Index tumbled 3.2 percent today, the biggest daily drop in 14 months, while futures on the Standard & Poor’s 500 Index rose less than 0.1 percent, erasing earlier losses of as much as 1.3 percent. The S&P 500 slumped 3.4 percent on June 4 as U.S. payroll data missed economists’ estimates and comments by Hungarian officials that their economy is in a “very grave” situation fanned concern that the sovereign-debt crisis will spread further. The decline was the biggest drop on the day of the U.S. Labor Department’s monthly jobs report since at least 1998, according to data compiled by Bespoke Investment Group LLC. Germany’s constitutional court is considering the possibility of imposing a temporary injunction against the country participating in the 750 billion euro ($896 billion) rescue package for indebted European countries agreed to in May, Der Spiegel reported. The news magazine cited a letter from the court president Andreas Vosskuhle. Greece’s benchmark stock index, the ASE Index, fell 2.8 percent to 1,443.60, the lowest level since March 1998. The European Central Bank meets on June 10 to decide the level of its benchmark interest rate. ECB Statement “The capital market is challenging the governments and the ECB and if there’s no response this week I think we will have another very rough week ahead,” Christian Gattiker, Zurich- based head of research and strategy at Bank Julius Baer & Co., which manages about $205 billion, said in a Bloomberg Television interview. “All eyes will be on the ECB statement.” Group of 20 finance chiefs meeting in Busan, South Korea, on June 4 to 5 failed to agree on steps to ensure the economic recovery will strengthen, and said the global rebound faces “significant challenges.” Confidence in stocks is sinking to record lows in the options market even with the U.S. economy poised for its fastest growth in six years. Contracts that pay off should the benchmark index for U.S. stocks plunge more than 23 percent from its April high cost 75 percent more than those speculating on gains, the biggest premium ever, according to data compiled by Bloomberg and OptionMetrics LLC. The 10-day average difference exceeded 50 percent 34 times since 1996. In those cases, the S&P 500 gained a median 7.2 percent in six months. Factory Orders European stocks trimmed some of their losses as German factory orders unexpectedly jumped for a second month in April as the weaker euro boosted export demand and companies increased investment. BHP Billiton and Rio Tinto paced a retreat in mining shares, losing 1.3 percent to 1,747.5 pence and 1.9 percent to 3,058.5 pence, respectively. Xstrata Plc, the fourth-biggest copper producer, slumped 2.9 percent to 923.7 pence. Aluminum, copper, lead and zinc fell on the London Metal Exchange. Barclays, Piraeus Barclays fell 0.9 percent to 285.9 pence as the U.K.-based lender was cut to “sell” at Evolution Group PLc. Lloyds lost 1.4 percent to 54.65 euros while Greece’s Piraeus Bank SA, the worst-performing major bank stock in Europe this year, slid 2.8 percent to 3.81 euros. Grifols fell 4.8 percent to 8.82 euros as Europe’s largest maker of blood-plasma products agreed to pay $19 in cash and 0.641 newly issued non-voting Grifols shares for each of Talecris’s. The deal gives Grifols almost a third of the $7 billion U.S. market for blood-based infusions, matching Baxter International Inc. and beating CSL Ltd.’s 29 percent share, said Andrew Goodsall, a health-care analyst with UBS AG in Sydney. Grifols doesn’t expect to have to make any divestments to satisfy the U.S. Federal Trade Commission over its acquisition of Talecris Biotherapeutics Holdings Corp., Grifols’ Chief Financial Officer Alfredo Arroyo said today in a telephone interview. Prudential Falls Prudential Plc fell 1.4 percent to 548.5 pence. Chief Executive Officer Tidjane Thiam will try to show shareholders today he has a plan to expand in Asia amid calls for him to resign following the failure of his $35.5 billion takeover of AIA Group Ltd. The insurer reported five-month sales of 1.36 billion pounds ($1.97 billion). Hellenic Telecom shares declined 6.6 percent to 6.07 euros after the company said it will pay a lower dividend than planned. A gauge of European telecommunications shares lost as much as 2.1 percent today, among the worst performers in the Stoxx 600. Opap SA slumped 5 percent to 10.92 euros, on course for the lowest close since 2004. Europe’s biggest publicly traded gambling company had its share-price forecast cut 26 percent to 17 euros at HSBC Holdings Plc. Leaking Well BP Plc gained 1.5 percent to 439.95 pence, rising for a third day as the company said it increased the oil-capture rate at its leaking well in the Gulf of Mexico. Petropavlovsk Plc advanced 1.7 percent to 1,245 pence after the third-largest gold miner in Russia said a Hong Kong fund will invest in the company’s iron-ore operation, valuing the unit at $860 million. Adidas AG gained 2.5 percent to 41.91 euros as Deutsche Bank AG raised the world’s second-largest sporting-goods maker to “buy” from “hold.” Voestalpine AG rose 2.7 percent to 22.50 euros as HSBC Holdings Plc lifted its stance to “overweight” from “neutral” on Austria’s biggest steelmaker. --Editors: David Merritt, Christiane Lenzner To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net; To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net.

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