European shares held steady yesterday, although Italian stocks slipped in strong volumes as Prime Minister Matteo Renzi said the European Union’s budget deficit limit of three per cent of economic output was outdated.
Shares in UK insurers also dropped, hurt by government plans to scrap a requirement that pension savings be used to buy an annuity. Legal & General was down 8.4 per cent and Aviva down 5.1 per cent after UK finance minister George Osborne announced the plans as part of the UK budget.
Miners lost ground again, with Antofagasta down 5.3 per cent, falling along with copper which hit its lowest level in more than three years yesterday on worries about weaker growth and tighter credit in China.
The FTSEurofirst 300 ended 0.07 per cent lower, at 1,305.14 points, while the euro zone’s blue-chip Euro STOXX 50 index added 0.08 per cent at 3,076.36 points.
Milan’s benchmark index FTSE MIB fell 0.3 per cent in volumes more than twice the daily average of the past three months, trimming recent lofty gains, with Generali, UniCredit and Telecom Italia down 0.8-1.1 per cent.
Renzi told the Italian parliament yesterday the EU’s current budget ceiling “is, objectively, an anachronistic parameter,” adding however that he would respect Italy’s pledges to remain within the limit. The EU Commission had expressed concern that Italy would overshoot.
Despite the day’s dip, the MIB is still up 11 per cent in 2014, strongly outpacing the broad FTSEurofirst 300 which is down nine per cent year-to-date, as investors bet on recovery from Italy’s worst recession in 70 years.
“There’s been a strong outperformance of the Italian market in the past few weeks. The market has been very resilient throughout the Ukrainian crisis, so it’s logical to have a bit of profit taking today after such a rally,” said Andrea Tueni, sales trader at Saxo Banque.
Bucking the trend, Spain’s IBEX rose 0.4 per cent, with Inditex surging 4.9 per cent after the world’s biggest fashion retailer posted strong sales so far this year and announced a pick-up in store openings.
UK insurers hurt by measures announced in the country’s Budget
Overall, investors avoided taking significant bets while the US Federal Reserve is meeting. Analysts said a further cut in the central bank’s monthly bond purchases by $5 billion was largely factored in, and the market would look for hints about the speed of future cuts and whether the Fed provides new guidance on when it might eventually raise interest rates.
“There is always some nervousness ahead of the Fed meeting. We expect the tapering process to continue and there is likely to be some guidance around the unemployment rate and future US rate rises, although we still don’t expect the first rate hike until July 2015,” Barclays Wealth strategist Henk Potts said.