European markets were mixed with traders largely still nervous of eurozone developments with doubts on the Italian banking sector helping push down the euro.
European leaders approved the latest tranche in the year-old rescue fund – contingent on Greece passing crash budget measures – as negotiations on a new rescue package went into high-gear.
In Italy, the spread between Italian and German 10-year bonds hit 212 basis points – their highest level since the creation of the euro, while banking shares suffered a shock plunge following market rumours of an imminent downgrade of Italy’s sovereign rating.
Nevertheless, London’s benchmark FTSE 100 index of top shares rose 0.41 per cent to close at 5,697.72 points. In Frankfurt, the DAX dropped 0.39 per cent to 7,121.38 points while in Paris the CAC 40 dipped 0.08 per cent to 3,784.80 points.
Milan tumbled 1.61 per cent, Madrid fell 1.31 per cent, Lisbon slid 0.55 per cent, Amsterdam was flat at up 0.05 per cent,
On the foreign exchange market, the euro fell to $1.4196 in London deals from $1.4257 in New York late Thursday.
“Nervousness has been the order of the day after a report out of Italy that a number of Italian banking shares had been suspended,” market analyst at CMC Markets Michael Hewson said
“At one point the FTSE was up over 90 points but as the day has gone on these sovereign debt concerns have slowly eroded the gains with the mining sector keeping the FTSE afloat.” Market sentiment was also dampened by politicians bent on horse-trading in Brussels instead focusing purely on finding solutions to the Greek debt debacle.
France, whose citizen Jean Claude Trichet is ending his tenure as European Cental Bank chief, demanded a spot on the ECB board in return for backing new chief Mario Draghi. A deal was made, with France getting its seat, defying the political independence of the institution.
Greek Prime Minster George Papandreou insisted that negotiations on second bailout plan worth some €110 billion were well underway, though the jittery day on the markets indicated investors saw little reason to hope for a visible end to the crisis.
Poor US date earlier in the week also troubled investors, Spreadex trader Simon Furlong said. “With disappointing jobs figures in the US, (Federal Reserve chairman) Ben Bernanke downgrading US growth output and a large opposition to austerity measures within Greece’s parliament, the light at the end of the tunnel is very dim indeed,” Mr Furlong added.
In the US, at 1630 GMT, the Dow Jones Industrial Average had slid 0.71 per cent to 11,964.10. The broader S&P 500 dropped 0.87 per cent to 1,272.30, while the tech-heavy Nasdaq Composite fell 0.89 per cent to 2,662.88.
In Asia, Tokyo rose 0.85 per cent, Sydney edged up 0.17 per cent, Hong Kong jumped 1.90 per cent and Shanghai surged 2.16 per cent.