European stocks closed lower and the euro rose yesterday as traders wondered whether China and the United States, the world’s two biggest economies, would provide more stimulus to revive growth.
After rising early in the day, the London’s benchmark FTSE 100 index of top companies was virtually flat at 5,776.6 points at close, Frankfurt’s DAX 30 lost 0.97 per cent to 6,949.57 points and in Paris the CAC 40 fell 0.84 per cent to 3,432.56 points.
Shares in Madrid slumped 0.79 per cent and in Milan they dropped 1.37 per cent while at midday in the US the Dow Jones Industrial Average was down 0.63 per cent and the broader S&P 500 index slipped 0.51 per cent.
“Investors are profit-taking after a US Fed official expressed doubt on the likelihood of new stimulus measures in the United States,” Frederic Rozier of Meeschaert Private Banking said.
Federal Reserve Bank of Saint Louis President James Bullard told broadcaster CNBC that new measures by the US central bank were not a certainty even though Wednesday’s release of minutes from the Fed’s latest policy meeting showed worries about slowing growth.
Ishaq Siddiqi of ETX Capital said: “Bear in mind that Bullard is not a voting member of the Federal Open Market Committee, but he did say yesterday’s minutes were ‘a bit stale’ and that the probability of further stimulus from the Fed is ‘not as high’ as the financial markets would indicate.
“Bullard played into the hands of the bears, who took the opportunity to cash in profits,” Mr Siddiqi said. Signs of weakening economic activity meanwhile came from around the globe as the leaders of France and Germany were to meet in Berlin to hammer out a common front concerning Greece’s bid to postpone budget obligations on its bailout package.
After Wednesday’s release of the Fed minutes, HSBC said its monthly measure of China’s manufacturing activity fell to a nine-month low in August.
Private business across the eurozone also showed a seventh consecutive monthly decline in August, according to a key purchasing managers’ index, with analysts warning that the single currency area was at a pivotal point if it is to escape a prolonged recession.
The European single currency rallied to $1.2590 however, the highest level since July 4. It later pulled back to $1.2578.