European stock markets close lower

European stock markets closed slightly lower yesterday, extending losses as investors waited for a clearer lead on the economic outlook, dealers said.

They said a marginally better-than-expected US new jobless claims report bolstered hopes that the US economy was not at risk of slipping back into recession but it was also not strong enough to justify any gains.

The markets, they said, have been consolidating after their recent advance and will need a solid new lead to break out of current ranges.

In London, the FTSE 100 index of leading shares closed down 0.28 per cent at 5,540.14 points. In Paris, the CAC 40 index lost 0.52 percent to 3,736.30 points and in Frankfurt, the DAX slipped 0.20 per cent to 6,249.65 points.

The euro rose against the out of favour dollar, hitting 1.3075 dollars, up from 1.3009 dollars in late New York trade Wednesday.

The dollar was little changed at 85.74 yen after 85.72 yen.

Gold hit a fresh record of just over 1,278 dollars an ounce during the day but by the close had slipped back to 1,272.50 dollars as commentators predicted more gains to come for the traditional safe haven investment.

In Paris, Pascal Plunet of Barclays Capital said volumes were thin, with the market unable to break through resistance at 3,800 points on the CAC 40.

The US jobless claims data had little impact but there could be more activity on Friday when the expiry of options and futures contracts usually drives interest, Plunet said.

In New York, the blue-chip Dow Jones Industrial Average was down 0.16 per cent at 1555 GMT as the tech-rich Nasdaq Composite index shed 0.36 per cent.

Dealers said the jobless claims figures suggested that the US economy was at least still on track but there was little likelihood of a strong upturn while the employment market remained weak.

“Our conclusion is that the economy is continuing to muddle forward at a slightly better pace than expected a month ago,” Frederic Dickson, chief market analyst at D.A. Davidson said.

“The evidence reinforces our view that the economy is not sliding into a deep recession, as expected in the double-dip scenario,” he added in a note.

New US jobless claims for the week to September 11 fell to 450,000, down 3,000 from the previous week and better than forecasts for 460,000.

Elsewhere in Europe, Amsterdam dropped 0.35 per cent, Brussels shed 0.70 per cent, Madrid was down 0.33 per cent despite a successful government bond sale, Milan lost 0.90 per cent and Swiss stocks fell 0.15 per cent.

Earlier in Asian trade, Tokyo closed flat, with investors increasingly believing that government efforts to stem the strong yen and so help exporters will not make much progress. Hong Kong fell 0.16 per cent and Shanghai was down 1.89 per cent on concerns the central bank could soon hike interest rates while Sydney lost 1.21 per cent.

Meanwhile yesterday Luxembourg Prime Minister Jean-Claude Mr Juncker hit out at Japanese and Chinese action on currency markets, saying his eurozone partners “don’t like unilateral intervention.”

Mr Juncker, who heads the Eurogroup of finance ministers who manage the shared currency, spoke out as Japan sought to stem the rise of the yen and as US Treasury Secretary Timothy Geithner bluntly warned China it had to let the yuan rise in value against the dollar to end trade distortions.

Japanese Prime Minister Naoto Kan yesterday pledged fresh “decisive” steps in currency markets if needed, 24 hours after a first global intervention since 2004 to help safeguard an export-driven recovery.

The euro firmed against the dollar yesterday following a successful Spanish bond issue while the single currency rose to 112.11 yen from 111.51 and the dollar was stable at 85.74 yen.

Speaking after a European Union summit, Mr Juncker said that the Japanese action was “not to be welcomed.”

He added: “We do think that the yen in its relation to the euro is not overvalued but is still undervalued, and we don’t like the way the Japanese authorities are dealing with that matter.

“It’s clear that we don’t like the behaviour of the Japanese.

“Interventions on the markets are only fruitful if they are organised in a truly committed way by the US and by the euro area and by Japan,” Mr Juncker underlined.

Amid rising anger in Washington over what some see as China’s ongoing currency manipulation behind the scenes, US Treasury Secretary Timothy Geithner faces increasing pressure to retaliate against Beijing.

Ahead of November elections shaped by voter anger at the sour economy, US lawmakers are weighing bills that would slap sanctions on Chinese goods, amid accusations that Beijing keeps its currency – and thereby its exports – artificially cheap.

“It is past time for China to move,” Mr Geithner said, adding that ending Chinese currency and other trade distortions were “core objectives.”