European stocks closed mostly higher yesterday, with investors cautious after recent heavy losses driven by fears the eurozone debt crisis is far from resolved and could bring down struggling Spain.
Dealers said the markets were trading in narrow, cautious ranges, trying to get a fix on the chances that the European Union will come up with a plan at a summit later this month to finally stem the tide threatening the bloc.
The immediate concern is in Spain, where the budget minister conceded the country was now effectively shut out of the financial markets but at the same time insisted it did not need a full bailout, only aid for its stricken banks.
Finance ministers from the Group of Seven industrialised economies meanwhile discussed the eurozone crisis.
“We were able to share our recognition on the European issue,” Japanese Finance Minister Jun Azumi was quoted by Jiji Press as saying after a conference call with his G7 counterparts.”The European side stated that they will respond to it speedily.” The impact was muted, however, with London closed for a second public holiday yesterday, meaning today could prove more eventful when Europe’s most important market re-opens for business.
A poor eurozone business and services survey confirmed the negative outlook for the economy even if there were some signs of progress on efforts to shore up weaker European banks – a key issue.
In Frankfurt, the DAX 30 slipped 0.19 per cent to 5,969.40 points while in Paris the CAC 40 gained 1.07 per cent to 2,986.10 points. Madrid rose 0.45 per cent, edging up again despite fears Spain could need a bailout and as top government officials repeated calls for help for the country’s banks which need to raise some €80 billion in fresh capital. Milan meanwhile put on 0.63 per cent.
London was closed for a second public holiday yesterday, making for subdued trade overall. In New York, stocks were flat, with both the Dow Jones Industrial Average and tech-rich Nasdaq Composite showing only marginal change after short-lived gains made on a better-than-expected US service sector survey.
The Institute for Supply Management’s services index rose to 53.7 in May from 53.5 in April, better than forecasts for a decline to 53.1 per cent.
“This is a mixed report ... but one that on balance suggests the economy continued to expand and that any slowdown in business conditions might prove to be short-lived,” RDQ Economics analysts commented.
On the foreign exchange markets, the European single currency fell to $1.2440 from $1.2494 in New York on Monday.
Gekko Markets trader Anita Paluch said that overall, “concerns around the global economic slowdown ... prevail, which prevents the markets from a more decisive move.”
Eurozone private sector activity suffered its worst monthly slide in nearly three years in May with steep declines in Spain, Italy and now also France.
The full Purchasing Managers Index (PMI) compiled by research firm Markit fell to 46.0 points in May, down from 46.7 in April in the fastest rate of decline since June 2009 but a shade better than the initial 45.9 points.