London: Europe’s stock markets steadied on Friday as investors paused for breath ahead of a key German vote on the massive EU rescue package, though worries lingered about the continent’s debt crisis and the future of the euro currency itself.
The FTSE 100 index of leading British shares was down just under 2 points at 5,071.15 while Germany’s DAX fell 31.13 points, or 0.5%, to 5,836.75. The CAC-40 in France was 4.36 points, or 0.1%, higher at 3,436.88.
Some respite is expected when Wall Street opens later, Dow futures were up 33 points, or 0.3%, at 10,089 while the broader Standard & Poor’s 500 futures rose 5.5 points, or 0.5%, to 1,075.50.
The European debt crisis continues to be the main point of interest in the markets and fears are growing that it may prove to be the catalyst to a renewed downturn in global growth, if not an outright slide back into recession. While many of the world’s leading stock markets are below the levels they started the year, oil prices have slid below $70 a barrel amid fears of waning global demand and US Treasury yields remain at 2010 lows.
Markets were spooked by what some see as the failure by Europe’s leaders to cooperate on economic issues, Germany’s decision earlier this week to curb some trading activities was a unilateral measure that was not greeted positively elsewhere in the EU or in the markets.
“Whilst there is a lack of uniformity in thinking over the way the EU should handle the crisis, the markets will remain volatile and sentiment may well stay weak, particularly as some economic data in the US looks less encouraging than many had hoped,” said David Buik, markets analyst at BGC Partners.
“There is now a feeling that growth may turn out to be anaemic,” said Buik.
Figures on Thursday provided hints that growth in the US could be stalling, weekly jobless claims, for example, rose by an unexpectedly large 25,000 in a sign that the labor market remains weak.
The main focus on Friday will likely be the vote in Germany’s Parliament to authorize the country’s contribution to a euro zone bailout facility at least €123 billion in loan guarantees.
It comes hard on the heels of a separate package to rescue Greece, which was already unpopular, particularly in Germany.
“The possibility that, despite German Chancellor Angela Merkel’s obvious politicking, the lower house might not back Germany’s participation in emergency bailout guarantees for troubled peripheral European countries, is frightening,” said Jeremy Batstone-Carr, director of private client research at Charles Stanley stockbrokers.
The expectation in the markets, though, is that Merkel will get her way and that’s helped the euro continue to clamber up from lows by late morning London time the euro was up 0.5% on the day at $1.2532, way up on the four-year low of $1.2146 recorded Wednesday in the wake of the German ban.
The relative calm was also evident in the oil markets, where benchmark crude for June delivery steadied above $70 a barrel. It was trading 22 cents lower on the day at $70.58 a barrel in electronic trading on the New York Mercantile Exchange.
Earlier in Asia, Japan’s Nikkei 225 stock average retreated 245.77 points, or 2.5%, to 9,784.54, while Australia’s S&P/ASX 200 index shed 0.3% to 4,305.40. Indonesia’s benchmark stock index plunged 3% but China’s stock market in Shanghai bucked the trend, rising 1.1%.
Hong Kong and South Korean stock exchanges were closed for a public holiday. Trading in Thailand has been suspended due to political turmoil.