European stocks fell and the euro slipped yesterday as Brussels urged leaders to seek compromise ahead of a key EU summit amid reports that a key rescue fund decision will be put off to another day.
Traders were anxious with the weekend summit fast approaching, hoping that European leaders will finally come up with a concrete plan to stick to but fully prepared for disappointment after so many false starts.
At the close, London’s benchmark FTSE-100 index of leading shares was down 1.21 per cent to 5,384.68 points. In Frankfurt, the DAX fell 2.49 per cent to 5,766.48 points and in Paris the CAC-40 shed 2.32 per cent to 3,084.07 points.
Elsewhere in Europe, Milan was down 1.90 per cent, Madrid 1.17 per cent, Lisbon 1.16 per cent, Zurich 0.74 per cent and Amsterdam 0.89 per cent.
The European single currency fell in volatile trade to $1.3680 from $1.3754 in New York late Wednesday. The dollar fell to 76.89 yen from 76.99 yen.
In Europe, reports from Germany of a summit delay helped dampen hopes of a wide-ranging agreement at the make-or-break talks and followed 11th-hour wrangling between the European Union “big two,” France and Germany.
Missing the birth of his baby daughter, President Nicolas Sarkozy rushed to Frankfurt late Wednesday to meet German Chancellor Angela Merkel as the two struggled to agree a roadmap to take Europe out of the impasse.
Government sources in Germany said the summit would take place on Sunday as planned but that key decisions on the European rescue fund would be put off to another day.
Before those reports, EU Commission President José Manuel Barroso had said it was vital to reach agreement on strengthening the debt fund, the European Financial Stability Facility (EFSF), created to be the bloc’s primary weapon to stem the crisis.
“If there is one aspect to outreach all the others it’s the need to reinforce the firewall,” he said.
Three days of talks on the crisis will be held in Brussels from today, first gathering the17 eurozone finance ministers, followed by finance ministers and foreign ministers from the 27-nation bloc.
The talks culminate with the summit on Sunday.
Analysts said uncertainty heading into the summit was stoking volatility on the financial markets.
“Unrealistic expectations regarding a wonder solution to the debt problems, which is a complicated issue, are what has led to increased volatility as investors over-responded to every political piece of news,” said Anita Paluch, a trader at Gekko Global Markets.
“It is quite unlikely that the weekend meeting will bring a complex systemic solution involving commitments from many parties, therefore another disappointment may follow if the markets are (positioned) for another ... ‘quick fix’.”
On Wall Street, US stocks were also lower, led down by the tech companies, but a positive weekly jobs claims report helped provide some support.
The Dow Jones Industrial Average fell 0.11 per cent to 11,430.80 points in midday trade. The broader S&P 500 shed 0.71 per cent to 1,201.24 points, while the tech-heavy Nasdaq Composite pared 1.29 per cent to 2,570.40 points.
US stocks were helped by the latest weekly jobless claims data which confirmed the slowly improving trend of the past two months.
In Asian trade yesterday, Tokyo closed down 1.03 per cent, Seoul shed 2.74 per cent and Sydney fell 1.63 per cent.