European stocks slip as rates stay on hold
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LONDON, Nov 8 AFP
November 09 2012, 04:57AM
European stock markets have closed lower and the euro edged down 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 Thursday 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.
After the Bank of England and European Central Bank held their main lending rates at 0.50 per cent and 0.74 per cent, respectively, "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 on Thursday 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 MPs 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 $US1.2717 from $US1.2767 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 said.
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 $US1,717 an ounce from $US1,715.25 on Wednesday, when Greek MPs approved huge cutbacks creditors had demanded to unlock aid that Athens needs to avert bankruptcy.
Budget cuts totalling 18.5 billion euros ($A22.9 billion) won a narrow majority as thousands of anti-austerity protestors demonstrated around parliament in Athens.
The measures to be implemented by 2016 include raising the retirement age to 67, slashing benefits and cutting the minimum wage.
The package was required for Greece to unlock a 31.5-billion-euro tranche of aid from its troika of international creditors - the European Union, International Monetary Fund and ECB.
On the corporate front, shares in Siemens jumped 1.80 per cent to 80.27 euros, while Commerzbank plummeted by 5.77 per cent to 1.42 euros after the second biggest German bank's return to profit in the third quarter fell short of expectations.
Britain's second-biggest insurer Aviva climbed 0.55 per cent to 330.30 pence as the company announced a drop in sales and confirmed it was in talks to sell its US business.