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European stocks treading water

Europe’s main stock markets ended narrowly mixed yesterday as upbeat Chinese data failed to dispell gloomy Japanese industrial sentiment and ongoing US fiscal cliff worries.

Frankfurt’s DAX 30 added 0.19 per cent to 7,596.47 points, while in Paris the CAC 40 was flat at 3,643.28 points.

London’s FTSE 100 index slid 0.13 per cent to 5,921.76 points, one day after Standard and Poor’s cut the outlook on Britain’s AAA credit rating from stable to negative, sparking concern over the potential loss of the top-level assessment.

The European single currency climbed to $1.3150, up from $1.3073 late in New York on Thursday.

Gold prices rose to $1,696.25 an ounce on the London Bullion Market, from $1,692.75.

“Europe’s markets after opening on a fairly positive note have struggled for direction this afternoon on fairly light volumes with the positive Chinese PMI being overshadowed by some rather disappointing rem­in­ders, that for all this week’s optimism about Greece’s bailout appro­val, initial framework for banking union, Europe’s economy remains in significant difficulty,” said CMC Markets analyst Michael Hewson.

He noted that while eurozone business activity showed some evidence of bottoming out in November, it came in below expectations in France and Germany.

Europe’s leaders gathered in Brussels yesterday for their seventh and final summit of a crisis-hit year, trumpeting deals to save Greece and monitor banks.

But leaders dampened hopes of a swift deal to radically overhaul the eurozone, leaving plans for the future in the long grass of 2014 and beyond. “The EU summit in Brussels seems to be less important and is likely to fade in the background as no major decisions will be taken (as far as) the euro and the eurozone are concerned at this meeting,” said ETX Capital trader Markus Huber.

But solid data from Asian powerhouse China helped boost market sentiment. HSBC said China’s manufacturing activity hit a 14-month high this month in another sign that the world’s number two economy was picking up steam.

The bank’s preliminary purchasing managers’ index (PMI) reached 50.9, up from a final 50.5 in November when the figure returned to growth after 12 consecutive months of contraction.

A reading above 50 shows expansion while one below signals contraction. The December reading is the highest since October last year.

“Very uplifting news from China, where the flash PMI hit 14-month high indicating green shoots of recovery continue to grow, inspiring stocks in Europe overshadowing lack of progress on fiscal cliff in America,” said Gekko Global Markets trader Anita Paluch.

However, markets remain nervous that US lawmakers seem to be making slow progress on an agreement to avert the fiscal cliff – $600 billion in spending cuts and tax hikes slated to come into effect on January 1 which could send the economy into recession.

President Barack Obama and Republican House Speaker John Boehner held what were described as “frank” talks Thursday. But there was little sign they had found common ground on a more bearable plan to cut the country’s huge deficit.

US stocks were down yesterday amid continued worries about Washington’s budget impasse, with a sharp drop in Apple weighing on the Nasdaq.

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