LONDON: European stock markets and the euro slid yesterday with traders waiting to see if EU leaders converged on Brussels will deliver concrete steps to tackle the eurozone’s spreading debt crisis.
London’s benchmark FTSE 100 index dropped 1.21 percent to 5,456.91 points, Frankfurt’s DAX 30 shed 1.48 percent to 6,136.49 points and in Paris the CAC 40 tumbled 0.77 percent to 3,039.49 points.
Madrid’s IBEX 35 rose 0.19 percent to 6,619.00 points as lawmakers passed a 2012 austerity budget.
In foreign exchange deals, the euro retreated to $1.2431 from $1.2467 late on Thursday in New York.
“European politicians have done a fantastic job of lowering expectations for the EU summit that begins today, which means that even the smallest ‘breakthrough’ may cause a short-term relief rally” across financial markets, said Kathleen Brooks, research director at Forex.com trading group.
EU leaders began debate on a so-called “a big leap forward” for increased integration and to save the euro at a two-day summit in Brussels, but splits might scuttle efforts to ring fence the single currency.
The 27 EU heads of state and government began their talks with the world anxiously awaiting a grand plan to save the single currency from a collapse with unfathomable global repercussions.
Cyprus and Spain have joined the earlier victims of contagion — Greece, Portugal and Ireland — in requesting aid.
With Italy, the eurozone’s third economy, also threatened, the EU is under pressure from world leaders to deliver a convincing plan to prevent a collapse of the single currency, which would have unfathomable global repercussions.
Spain’s parliament gave final approval yesterday to an austerity budget for 2012 that foresees a record 27 billion euros in savings to slash the soaring public deficit.
Prime Minister Mariano Rajoy’s government has vowed to cut the deficit from 8.9 percent of output last year to 5.3 percent this year — but even the IMF has said Spain is likely to miss the target.
Asian stock markets mostly closed higher but gains were capped by low expectations of a breakthrough at the EU summit.
Official data released on Thursday showed unemployment in Germany edged up in June as uncertainty from the eurozone debt crisis hits the labor market.
The number of job seekers in Europe’s top economy rose by 7,000 in June from the level in May, according to seasonally-adjusted figures published by the Federal Labour Agency in Nuremberg.
German Chancellor Angela Merkel flew to Paris late on Wednesday for talks with French President Francois Hollande in an 11th-hour bid to bridge the gap between Europe’s two biggest economies over how to solve the crisis.
She warned lawmakers in Berlin that there were “no quick, no easy” solutions, and no “magic formula” to end the problems in the 17-nation currency bloc.
“Financial markets are hoping that EU leaders will be able to come to some form of agreement about steps toward some form of banking union and a deposit guarantee scheme, as well as agree to measures to help lower borrowing costs in Spain and Italy,” said Michael Hewson, senior analyst at CMC Markets trading group.
“Expectations are low so the potential for a positive surprise is there; unfortunately it seems more likely that nothing tangible is likely to be agreed given that EU officials are already playing down expectations.”
European stocks, euro slide as EU summit opens
