European stocks sink over EU summit doubt

European equities fell yesterday, hit by a lack of rapid progress towards full EU banking union at a key summit, while traders remembered the 25th anniversary of the 1987 global stock market crash.

At the closing in Europe, London’s FTSE 100 index of top companies fell 0.35 per cent to 5,896.15 points, in Frankfurt, the DAX 30 dropped by 0.76 per cent to 7,380.64 points, while in Paris the CAC 40 gave up 0.87 per cent to 3,504.56 points.

Madrid’s IBEX 35 sank 2.31 per cent to 7,913.40 points on a lack of any clear breakthrough at a summit in Brussels and after German Chancellor Angela Merkel voiced stiff opposition to using new eurozone rescue funds to replenish the coffers of troubled Spanish banks.

“There will not be a retroactive direct recapitalisation,” Merkel said, which meant that the European Stability Mechanism could not finance an already agreed Spanish banking rescue plan.

In foreign exchange deals, the euro eased to $1.3028 from $1.3067 late in New York on Thursday.

Gold prices slipped to $1,737 an ounce on the London Bullion Market from $1,743 an ounce.

US stocks fell sharply yesterday as third-quarter earnings season served up disappointments from General Electric, McDonald’s, Microsoft and Chipotle.

In midday trading, the Dow Jones Industrial Average fell 1.09 per cent, the broad-based S&P 500 lost 1.18 per cent, while the Nasdaq Composite nose-dived 1.67 per cent.

“The results from some US companies are clearly below expectations. We feel the weight of the economic slowdown,” said Frederic Rozier, a portfolio manager at Meeschaert Gestion Privee.

Asian stock markets closed mixed yesterday as profit-taking set in after a week-long rally fuelled by upbeat Chinese economic data and raised hopes for the future of the eurozone, dealers said.

In Brussels, EU leaders pressed on with their two days of policy talks. By the early hours of yesterday they had an agreement, of sorts, on bringing banks under bloc-wide supervision next year.

“EU leaders finally agreed to a banking union between member states, adopting a legal framework by the end of 2012 giving the European Central Bank overall control of the supervision of EU banks,” said Alistair Cotton, an analyst at Currencies Direct trading group.

However, they failed to pin down an exact date – dashing hopes of a quick move towards a full banking union.

“There have not been many new revelations coming out of Brussels... the banking union might be progressing somewhat slower as expected,” noted ETX Capital trader Markus Huber.

The spotlight also remained on Spain after a Government official said that Madrid no longer expects to recapitalise its ailing banks without adding to the public debt burden.

Investors remained cautious on the 25th anniversary of Black Monday, when billions of dollars were wiped off global equities in the infamous 1987 stock market meltdown. (AFP).