European stocks slip, interest rates stable

European stock markets closed lower and the euro edged down yesterday after European central banks held key interest rates at record low levels and debt-stricken Greece approved new austerity measures.

Financial markets are still concerned about how the Greek debt drama will unfold and that President Barack Obama’s re-election has raised the spectre of a bitter fiscal stand-off in Washington.

After spending most of the day in the black, London’s FTSE 100 index of top companies reversed course to close down by 0.27 per cent at 5,776.05 points, Frankfurt’s DAX 30 gave up 0.39 per cent to 7,204.96 and the Paris CAC 40 eased 0.06 per cent lower to 3,407.68 points.

In widely expected moves, the Bank of England and European Central Bank held their main lending rates at 0.50 per cent and 0.75 per cent respectively.

“Both the Bank of England and the European Central Bank kept their monetary policies unchanged at their respective meetings today, raising some slight concerns that the stimulus spigot is getting tighter,” said Christopher Vecchio, Currency Analyst at DailyFX.

“In the BoE’s case, this is likely, at least through the first few months of 2013, but for the ECB, another rate cut could be on the horizon,” he said.

After the rate decisions, “attention is now on Monday’s EU meeting where ministers will cast their verdict on the Greek deal,” said Ishaq Siddiqi at ETX Capital

Eurozone finance ministers are to decide whether to release a long-awaited instalment of financial aid to Greece, which posted yesterday a record level of unemployment at 25.4 per cent of the workforce.

In Frankfurt, ECB President Mario Draghi welcomed a sweeping austerity package passed by Greek lawmakers on Wednesday to unlock its critical international aid.

“The ECB certainly welcomes the outcome of the vote yesterday as a very important step. It really represents progress,” Draghi told a news conference.

In New York, US stocks also opened on an upbeat note but then fell into the red.

In midday trades, the Dow Jones Industrial Average gave up 0.18 per cent while the broad-based S&P 500 was off by 0.27 per cent and the tech-rich Nasdaq Composite slipped by 0.31 per cent.

In foreign exchange activity, the euro fell to $1.2717 from $1.2767 late in New York on Wednesday.

“The euro is struggling to get back on its feet,” Commerzbank analysts noted. “Scepticism toward the euro remains a constant feature amongst market participants at present,” they added.

On sovereign bond markets, the rate on 10-year Spanish debt jumped to 5.851 per cent from 5.693 per cent, while the comparable Italian rate rose to 5.019 per cent from 4.908 per cent. Traders pointed to uncertainty about whether Spain would bow to market pressure and formally ask for financial aid.

Gold prices edged up to $1,717 an ounce from $1,715.25 on Wednesday, when Greek lawmakers approved huge cutbacks creditors had demanded to unlock aid that Athens needs to avert bankruptcy. (AFP)


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