European shares slid yesterday, giving up some of the stellar gains after top central banks pumped dollar liquidity into the banking system to avert a global financial crisis.
London’s FTSE 100 index of top companies dipped 0.29 per cent to 5,489.34 points, while in Paris the CAC-40 dropped 0.78 per cent to 3,129.95, points and in Frankfurt the DAX 30 fell 0.87 per cent to 6,035.88 points.
Milan slid 0.16 per cent and Madrid gave up 0.34 per cent.
The European single currency meanwhile firmed to $1.3464, compared with $1.3438 late in New York on Wednesday. The dollar rose to 77.70 yen from 77.58 yen on Wednesday.
US stocks also slipped after stunning four-plus per cent jumps on Wednesday, with the Dow Jones Industrial Average down 0.34 per cent to 12,004.89 points approaching midday.
The broader S&P 500 lost 0.24 per cent to 1,244.00 points, while the tech-heavy Nasdaq Composite eased by 0.04 per cent to 2,619.39 points.
Global markets and the euro had rocketed on Wednesday after six major central banks, led by the US Federal Reserve, pumped liquidity into the financial system to prevent a global breakdown driven by the eurozone debt crisis.
In a surprise move, the central banks of the United States, the eurozone, Britain, Japan, Canada and Switzerland said they would cut the cost of providing dollars to banks.
“The action by the central bank is a direct counter-attack to the tensions in the interbank market which have continued to worsen as a consequence of the eurozone crisis and stresses in the banking sector,” said Rabobank analyst Jane Foley.
The arrangement allows the central banks to lend dollars to commercial banks that might be finding it hard to borrow directly from other banks.
They said they would reduce the interest rate on this operation by half a percentage point from December 5 until February 1, 2013.
However, Bank of England Governor Mervyn King said that the coordinated central bank action was only “temporary relief” to the eurozone’s “underlying solvency problems” which he said have to be tackled directly by the governments.
The European Central Bank will not act as lender of last resort for struggling eurozone countries, its chief Mario Draghi insisted yesterday, but left the door open to other measures if governments agree on budgetary consolidation.
Asian markets jumped yesterday after the move to boost liquidity for the gummed-up financial system, despite official data showing that Chinese manufacturing activity shrank in November for the first time since February 2009.