European stock markets closed lower yesterday as soft US data sparked fresh doubts over the economic outlook and investors tried to get a fix on the first Japanese forex intervention since 2004.
Dealers said US industrial output data slowed in August, as expected, but there was weakness too in a New York region report, doing little for sentiment after recent strong gains made on hopes the recovery would be sustained.
Tokyo’s foray into the market to halt the yen’s rise, and so ease the pressure on its exporters, proved initially effective, sparking large gains in Japanese stocks and in the dollar but the momentum faded over the day.
Dealers said the big question now was how much further Tokyo would go, with Finance Minister Yoshihiko Noda pledged further steps after weeks of trying in vain to talk the yen down. In London, the FTSE 100 index of leading shares closed down 0.21 per cent to 5,555.56 points.
In Paris, the CAC 40 index lost 0.50 per cent to reach 3,755.64 points and in Frankfurt, the DAX dropped 0.22 per cent to 6,261.87 points.
The euro was firmer at 1.3008 dollars, up from 1.2994 dollars in New York late on Tuesday while the dollar jumped to 85.61 yen from 83.06 yen.
Gold slipped back to 1,267 dollars an ounce from record highs just under 1,275 dollars made last Tuesday on safe-haven buying.
Dealers said the announcement of new EU rules to regulate speculative investment instruments and practices, including short-selling, blamed for the global financial crisis may also have dampened confidence.
“No financial market can afford to remain a Wild West territory,” said EU Financial Services Commissioner Michel Barnier, warning that OTC derivatives have a “big impact” on the prices of products ranging from mortgages to food.
“The absence of any regulatory framework for OTC derivatives contributed to the financial crisis and the tremendous consequences we are all suffering from,” he said.
In Paris, one dealer said the market was little moved overall, with the CAC 40 index facing strong technical resistance at 3,800 points.
“For the moment, there is no lead strong enough to take the market out of this range and it will likely hold around these levels for the next few days,” the dealer said.