European stocks closed mostly lower yesterday, giving up gains as markets waited on talks between EU finance ministers and kept a wary eye on the Far East after the death of North Korea’s Kim Jong-Il.
Dealers said the initial reaction to the death of Kim Jong-Il was that there would be no broad change in North Korea after the death of its leader but everyone knows how unpredictable Pyongyang can be and so were cautious.
Trade was quiet as investors wound down for the Christmas break after the huge volatility of recent months driven by every twist and turn of the eurozone debt crisis, they said.
A teleconference between eurozone finance ministers on meeting pledges of some €200 billion ($260 billion) in fresh funds for the International Monetary Fund was the main focus of attention but the outcome remained uncertain.
Senior European Commission economy spokesman Olivier Bailly said the hope was that ministers would meet the commitments made but added that yesterday was a “political deadline, not a legal deadline.”
Fitch Rating’s decision on Friday to downgrade France’s outlook and warn of possible downgrades for six eurozone other countries was another negative.
In London, the FTSE-100 index of top companies closed down 0.42 per cent at 5,364.99 points. In Paris, the CAC-40 edged up 0.06 per cent to 2,974.20 points while in Frankfurt the DAX 30 fell 0.54 per cent to 5,670.71 points.
Madrid gained 0.60 per cent, bucking the trend but off its highs after incoming prime minister Mariano Rajoy outlined plans to slash the budget deficit next year by €16.5 billion.
“The Christmas break may now be very much in sight for traders but equity markets seem unlikely to find themselves awash with festive cheer in the coming days,” said IG Markets trader Terry Pratt.
“There’s the very real prospect of some significant credit ratings downgrades in Europe to contend with, whilst that breaking news of the death of North Korean leader Kim Jong-Il is going to bring the geopolitical situation in North East Asia very much back onto the agenda too.”
In New York, the market also slipped back, with the blue-chip Dow Jones Industrial Average down 0.49 per cent at round 1700 GMT and tech-heavy Nasdaq Composite off 0.50 per cent.
Stocks started the session in positive territory, “overcoming early pressure that came on concerns about political instability in northeast Asia after reports of the death of North Korean leader Kim Jong-Il,” Charles Schwab analysts said in a research note.