European stocks and the euro waver in pre-EU summit trade

European stock markets and the euro wavered in cautious trading yesterday, a day after sharp losses and ahead of a key EU summit on how best to tackle the eurozone debt contagion.

At close, London benchmark FTSE 100 index of leading shares dipped 0.07 per cent to 5,446.96 points. In Frankfurt, the DAX 30 edged up 0.07 per cent to 6,136.69 points and in Paris the CAC 40 lost 0.30 per cent to 3,012.71 points.

Madrid’s IBEX 35 index slid 1.44 per cent to 6,528.40 points and Milan’s FTSE Mib fell 1.11 per cent to 12,968 points.

US stocks also showed moved cautiously on Tuesday as investors digested another month of rising home prices in the troubled sector and a sweeping Moody’s downgrade of Spanish banks. In midday trading, the Dow Jones Industrial Average fell 0.15 per cent, the S&P 500-stock index was unchanged, while the tech-rich Nasdaq rose 0.17 per cent. At close in Asia, Tokyo fell 0.81 per cent, but Hong Kong rebounded from three days of losses to end 0.45 per cent higher.

“After a miserable start to the week, shares were able to shrug off some of the losses from the previous session with some support from German consumer sentiment surprising to the upside,” said Anita Paluch, a senior trader at Gekko Global Markets.

Top eurozone finance ministers meet in Paris on Tuesday in last-minute efforts to ensure that the summit this week launches the EU towards far greater integration and stops debt contagion fires in Spain.

Ambition is high and tension is growing ahead of the summit, with financial markets worried the outcome might again be disappointing in terms of credibility.

European Union leaders due in Brussels on Thursday are to consider proposals to eventually give EU authorities more power over eurozone national budgets, and to establish banking supervision across the single market.

The 17-nation eurozone is struggling to convince markets it can get to grips with spreading crises.

The latest blows were a downgrading of 28 Spanish banks and a call for help from eurozone member Cyprus.

In foreign exchange deals yesterday, the euro dropped to $1.2472 from $1.2502 late on Monday in New York. The dollar fell to 79.4770 Japanese yen from 79.64 yen.

“The markets aren’t holding out too much hope for a neat resolution to the sovereign debt crisis at this week’s EU summit,” said Kathleen Brooks, research director at online trading group Forex.com.