European stock markets closed mixed yesterday, finding some support after recent heavy losses driven by increasing concerns over the eurozone debt crisis, weak US data and a slowdown in China.
Dealers said trade was relatively quiet after the turmoil of recent weeks as investors kept close watch on Spain, seen by many as most at risk of needing a debt bailout to follow Greece, Ireland and Portugal. Madrid and Milan both posted sharp gains in a technical rebound but dealers said the gains lacked conviction, with the European outlook increasingly bleak as the economy slumps back into recession.
A public holiday in London — which will also be closed today — made for muted trade.
In Frankfurt, the DAX 30 fell 1.19 per cent to 5,978.23 points, ending a volatile day below the key 6,000 points support level, but in Paris the CAC 40 added 0.14 per cent at 2,954.19 points. Madrid finished with a gain of 2.88 per cent points despite worries that Spain could be forced into seeking outside help so as to stabilise its banking system. Milan rose 1.19 per cent.
“For the start of the new trading week things are looking increasingly bleak for European equities,” ETX Capital trader Markus Huber commented. The underlying tone was negative, Huber said, noting “Friday’s much-worse-than-expected US job data and news overnight out of China pointing towards a broadening of the slowdown from manufacturing into the service sector.”
Meanwhile, on foreign exchange marke the euro was at $1.2496 dollars, up from $1.2423 in New York late Friday.
David Song, analyst at DailyFX, said the euro got support after Spanish Prime Minister Mariano Rajoy called for a ‘banking union’ in Europe, thereby providing aid for the lenders, especially in Spain. Mr Song said the idea was “gathering pace as French Finance Minister Pierre Moscovici and European Central Bank board member Ewald Nowotny voice their support” but at the same time, Germany remained strongly opposed for the moment.
US stocks opened moderately higher after slumping more than 2.0 per cent Friday after much-weaker-than-expected new jobs data showed the US economy stalling. The blue-chip Dow Jones Industrial Average was down 0.22 per cent and the high-tech Nasdaq Composite shed 0.28 per cent at around 1555 GMT.
“The US stock market is going to remain beholden to headlines out of Europe for a while,” said Dick Green of Briefing.com, who suggested there may be some signs that “Germany may be softening its stance on European-wide solutions.”
Tensions on the money markets also eased yesterday, with the yield or rate of return earned on Spanish 10-year bonds falling sharply to 6.3920 per cent from 6.495 per cent but they remained still well above the 6.0 per cent danger level. Economists warned that European authorities did not seem to be tackling the debt crisis in a determined and coordinated manner, leaving investors to fear stock prices could sink further still.
“While many consider the recent move to the downside as vastly overdone, any help in the short term seems also hard to come by with politicians continue to disagree about measures to stabilise the current situation and the ECB unwilling being dictated to by falling markets and a worsening in sentiment,” Mr Huber said.
UniCredit Chief economist Erik Nielsen said “global political leadership is in short supply these days.”
Earler yesterday, Asian markets were badly hit by the US jobs data, with Tokyo falling 1.71 per cent to its lowest mark since late November.