European main stock markets dipped yesterday on fears that the arrest of IMF boss Dominique Strauss-Kahn could hit efforts to tame the eurozone debt crisis, as EU finance ministers met to discuss rescues for Portugal and Greece.
While Europe’s main indices initially dropped sharply on the news, as the day wore on they recovered somewhat with London’s FTSE 100 index of leading shares finishing the day off 0.04 per cent at 5,923.69 points.
In Frankfurt the DAX ended down 0.21 per cent to 7,387.54 points while in Paris the CAC 40 fell 0.72 per cent to 3,989.82 points.
Elsewhere in Europe, shares in Lisbon slid 0.32 per cent and Milan dropped 0.36 per cent.
Madrid edged up 0.07 per cent and Amsterdam gained 0.72 per cent.
Brussels and Swiss stocks ended the day essentially flat.
US markets opened lower on the back of weaker European markets as investors remained cautious about taking on extra risk in light of the problems in Europe, but by midday were mixed.
At about 1600 GMT, the Dow Jones Industrial Average was up 0.21 percent to 12,622.35 points.
The broader S&P 500 nudged up 0.15 per cent to 1,339.77 points, while the tech-heavy Nasdaq Composite fell 0.39 per cent to 2,817.51 points.
In Asia, Japanese shares closed down 0.94 per cent after more details emerged on the damage to a stricken nuclear plant, sending Tokyo Electric Power and other utilities lower, dealers said.
“European equities have commenced trading with caution this morning on concerns that the Strauss-Kahn affair will likely delay any progress on the European debt crisis,” said Spreadex trader Chris Purdy.
The storm over the IMF chief’s sex assault case threw a giant cloud yesterday over a European finance ministers’ meeting, where ministers discussed Portugal’s bailout and further possible aid to Greece as markets increasingly expect Athens to need to restructure its debt.
Mr Strauss-Kahn has played a key role in striving to tame Europe’s debt crisis, helping persuade reluctant Germany and others to back rescue packages, and had been due to the EU talks.
Michael Hewson, a market analyst at CMC Markets, said Mr Strauss-Kahn’s arrest was an “unwelcome distraction to the IMF, as it, with EU leaders, struggles to contain fears of a likely restructuring of Greek debt”.
In company news yesterday, the London Stock Exchange said it remained committed to a merger with its Toronto counterpart, after a Canadian consortium launched an informal takeover bid that could derail the deal.
Elsewhere, German luxury carmaker Daimler and British engine manufacturer Rolls-Royce mooted a raised offer for German motor and turbine maker Tognum.
In reaction, shares in Daimler dropped 0.93 per cent to €50.09 and Rolls-Royce also initially fell but finished the day flat at 648 pence.
Tognum shares rose 0.50 per cent to €25.92.
A merger of the company with relevant activities already owned by Daimler and Rolls-Royce would create a global leader in the “off-highway” sector of marine, energy, defence and industrial applications.
Ratings agency Moody’s meanwhile again downgraded Tepco, the operator of Japan’s stricken Fukushima nuclear plant, and warned the rating would remain on review for further possible action.