October 11, 2011 / 3:12 AM / 7 years ago

European stocks dip, euro pauses ahead of Slovak vote

LONDON (Reuters) - European shares fell on Tuesday, while the euro took a breather from a rally against the dollar with investors focused on Slovakia’s parliamentary vote 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 go active. The vote by Slovakia’s parliament is finely balanced and a failure to pass the vote would rattle markets.

“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 958.02 points, after rising 1.7 percent on Monday. The banking index .SX7P was down 0.1 percent.

European shares bucked the trend seen in Asian stock markets. Asian shares rose after China moved to support its stock market by buying shares of major banks.

All of which left the MSCI’s All-Country World index .MIWD00000PUS 0.25 percent higher. But the index is still around 18 percent below its May high for the year.

It climbed back above the 20 percent loss level — the rule-of-thumb definition of 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 euro was virtually unchanged around $1.3651 on Tuesday, after surging nearly 2 percent to just below $1.37 on Monday. The single currency edged up against the yen to around 104.60. <FRX/>

“We think the Slovak vote will go through and people are too negative in expecting them to vote it down. This should keep sentiment in favor of the euro,” said Manuel Oliveri, currency strategist at UBS.

The dollar rose 0.1 percent against a basket of currencies .DXY.

German Bunds edged higher with the December Bund futures 20 ticks higher at 134.82.

Spot gold prices edged higher while Brent crude held near $109 a barrel. <O/R>

Additional reporting Brian Gorman and Neal Armstrong; Editing by Chris Pizzey

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