Global stock markets were lower in cautious trade yesterday as investors waited in hope for a second EU summit to produce a long-awaited plan to solve the eurozone debt crisis.
Dealers said there was little reason to trade aggressively given the often conflicting news leads as officials try to thrash out the details of what European leaders say should be a comprehensive solution to the problem.
They said that, however, looks unlikely, given the competing interests involved and the issues at stake – no less, for some, than the future of the whole eurozone project and the European Union.
In mid-afternoon trade, London’s benchmark FTSE 100 index was down 0.96 per cent, giving up early modest gains. Frankfurt’s DAX 30 lost 0.91 per cent and Paris fell 1.31 per cent.
In the foreign exchange market, the European single currency was lower at $1.3891, down from $1.3930 in New York late Monday. In New York, the blue-chip Dow Jones Industrial Average was down 1.08 per cent in opening trade, with the tech-heavy Nasdaq Composite down 1.36 per cent.
Dealers said Europe’s leaders appeared to be still struggling to reach agreement with banks over reducing Greece’s debt burden and protecting Italy from any fallout.
Jim Cunningham at Schaeffer’s Investment Research said US investors were also “responding to lackluster earnings guidance from the likes of tech giant Texas Instruments and entertainment guru Netflix.”
EU officials are making final preparations for a make-or-break summit in Brussels on Wednesday against a backdrop of increasing uncertainty over Italy’s immediate future and wrangling over the terms of an overall debt package.
“The EU will reveal, in all its full glory, the plan to resolve southern Europe’s debt crisis,” said Mark Deans, dealing manager at London-based currency specialists MoneyCorp.
“Until then, those with cash to invest are inclined to bide their time,” he added.
“If EU leaders get it right, that cash will go into equities, commodities and their related currencies. If they get it wrong the money will go into... safe-havens.”
Attention remains fixed on Europe, where Italy and Spain appear the next most likely victims of a crisis that many fear could spark a credit crunch and possibly another global meltdown if the problem is not remedied.European leaders, who held talks on Sunday, appeared to make progress in their efforts to fix the continent’s economic problems and put the final touches to a deal on Wednesday.
They announced few details at the weekend but promised instead to reveal all after those top-level talks.
The eurozone wants to beef up its €440-billion rescue fund, the European Financial Stability Facility, to convince markets it has the means to protect highly indebted nations.