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European stocks mixed as US cliff eclipses Japan vote

Europe’s main stock markets closed with mixed results yesterday as investor concern about a looming US fiscal deadline overshadowed the election of a new Japanese leader, dealers said.

London’s benchmark FTSE 100 index of leading shares ended the day with a slight loss of 0.16 per cent at 5,912.15 points, while Frankfurt’s DAX 30 index rose by 0.11 per cent to 7,604.94 points and the Paris CAC 40 declined by 0.14 per cent to 3,638.10.

The European single currency rose slightly against the dollar to stand at $1.3169. Gold prices fell by just a half dollar to $1,695.75 an ounce on the London Bullion Market, from $1,696.25 on Friday.

In New York, US stocks showed gains in midday trading, two weeks before the world’s biggest economy could go off the so-called fiscal cliff, a combination of automatic tax increases and spending cuts slated to take effect on January 1 and which could send business activity into a tailspin.

The Dow Jones Industrial Average was up 0.42 per cent while the broad-market S&P 500 rose 0.58 per cent and the tech-rich Nasdaq Composite gained 0.43 per cent.

In Japan, the conservative opposition swept to victory in national polls on Sunday as former premier Shinzo Abe’s Liberal Democratic Party (LDP) ousted Prime Minister Yoshihiko Noda’s Democratic Party of Japan (DPJ) from power.

In reaction, Tokyo shares climbed 0.94 per cent while the yen slumped to a year-and-a-half dollar low, in a boon for exporters, as investors bet on more monetary easing by the Bank of Japan.

In earlier Asian trade, the dollar surged to 84.48 yen – its highest since April last year. It later stood at 83.70 in London deals.

However, other Asian stock markets ran out of steam as fears returned over the looming US fiscal deadline.

Hong Kong shed 0.41 per cent, Seoul dropped 0.60 per cent and Sydney closed down 0.21 per cent in value.

“Traders are torn between the east and the west today,” said analyst David Madden at trading group IG.

“The news that Shinzo Abe won the latest Japanese elections drove stocks higher overnight, but the dreaded (US) fiscal cliff has taken the edge off his victory.

“Mr Abe is in favour of further monetary easing, and stocks rallied as investors feel he is likely to appoint a governor to the Bank of Japan who will toe the line.”

European markets are subdued with just two weeks to go until the end of the year, which usually witnesses low trading volumes.

However, the US fiscal deadline will remain top of the agenda, dealers said.

“With investors traditionally closing their books at the end of the year, the last two weeks of trading that are left should be quiet and peaceful with rather reduced volume,” said Gekko Global Markets trader Anita Paluch.

“There is, however, one thing, that keeps everyone on their toes and this is the ‘last minute’ nature of the fiscal cliff negotiation; any deal really could have a big effect on the markets.

In company news on Monday, British oil giant BP said it had agreed to sell its 50 per cent stake in a North Sea gas field to energy firm SSE for $288 million (€219 million) as part of its divestment plans.

BP shares initially retreated on news of the deal, which is due to complete in the first half of 2013, but ended the day with a slight gain of 0.13 per cent to 427.0 pence.

In Madrid, Banking giant Banco Santander announced it will absorb its Spanish offshoots Banesto and Banif, closing 700 branches and saving an estimated €520 million a year.

In reaction, the bank’s share price dropped 1.19 per cent to €5.83 on Madrid’s IBEX 35 index, which was 0.20 per cent higher at 8,040.30 points.

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