European stock markets closed firmer in choppy trade yesterday as mixed US economic data drove investors to and fro after positive eurozone consumer confidence figures gave an early boost.
Dealers said investors continued to be wary over the Greek debt crisis but managed a solid start as oil prices fell, easing concerns that soaring energy prices could undercut growth.
Speculation that General Motors was to take a stake in PSA Peugeot Citroen stirred interest, driving the French company’s shares up sharply in early trades, though they finished the day with a gain of just 0.42 per cent.
News that US durable goods orders slumped four per cent in January gave pause for thought, halting the upturn, but a strong US consumer confidence report helped stocks recover before another US survey showed home prices continued to fall in December.
Ireland’s decision to call a referendum on the EU’s fiscal pact, designed to tighten budget controls to prevent a repeat of the eurozone debt crisis, gave the euro a knock but the impact was fleeting.
In London, the benchmark FTSE 100 index of leading shares closed up 0.21 per cent to 5,927.91 points. In Frankfurt, the DAX 30 rose 0.56 per cent to 6,887.63 points and in Paris the CAC 40 put on 0.36 per cent at 3,453.99 points.
The euro slipped to $1.3389 on the Irish news but then picked up to $1.3462, well up from $1.3398 in New York late Monday.
“It was a knee-jerk reaction. The foreign exchange market does not like referendums as a rule since it makes it even harder to get stuff done in the eurozone,” said Kathleen Brooks, research director at Forex.com.
“The problem is, if Ireland’s action spurs referendums elsewhere, then this makes it less likely the ‘fiscal compact’ will be put in place.
“That makes it less likely the Germans will commit more funds to enlarge the European Stability Mechanism/European Financial Stability Facility fund,” she said, referring to the bloc’s rescue systems.
On Wall Street, stocks opened narrowly mixed but then turned firmer after the varied data played out. The blue-chip Dow Jones Industrial Average was up 0.22 per cent at 12,976.74 points while the tech-heavy Nasdaq Composite added 0.63 per cent at 1700 GMT.
Karee Venema of Schaeffer’s Investment Research said the Dow was still “on pace to test 13,000 points in yesterday’s session, after pulling back from the psychologically significant level in the final hour of Monday’s trade.
Analysts meanwhile blamed the fall in the durable goods orders report on the expiry of a capital investment tax break rather than a slowdown in the economy.
In Europe, data showed consumer confidence in the 17-nation eurozone rising in February, with a separate survey showing a similar performance in Germany, the bloc’s paymaster and top economy.
The figures came as the eurozone debt crisis rumbled on, with the European Central Bank suspending acceptance of Greek government bonds as collateral after the country was downgraded to “selective default” by Standard and Poor’s.
The ECB move will almost certainly make it difficult for Greek banks in particular to take advantage of an unlimited amount of ultra-cheap three-year loans being made available by the central bank today in an operation aimed at averting a credit crunch in the single currency area. At the same time, S&P said Greece would be upgraded again once a controversial debt write-down scheme with private creditors is completed.