Stocks slip on EU summit doubts

CONTINUING UNCERTAINTY about the possibility of a comprehensive deal being agreed this week to resolve the euro zone financial crisis weighed on markets in Europe yesterday.

DUBLIN

It was another day of volatile trading on the Irish stock market yesterday.

Early trading was described as “nervous” with a rally towards the close.

CRH was down 1 per cent to €13.90 on a day when it announced that former chief executive Liam O’Mahony was retiring from the board. “There were sellers around in CRH,” said one trader.

Food company Greencore suffered a 1.55 per cent reverse to close at 63.5 cent.

Its been a mixed week for the company. A potential offer failed to materialise but the company reported good results on Tuesday.

A 1 cent rise to 24 cent made Independent News Media the biggest gainer on the day.

Elan continued its good run of late, with its shares closing up just under 4 per cent at €8.923.

Pending changes to betting taxes in Ireland did nothing to halt the gallop of bookmaker Paddy Power, which was up 58 cent at €42.31.

Exploration stock Petroceltic, which is quoted on the junior ESM market in Dublin, rose by 6.25 per cent to 8.5 cent on positive news from a gas field in Algeria.

LONDON

Britain’s top shares fell after comments from a German government official eroded optimism about a comprehensive deal to solve the euro zone’s debt crisis at this week’s crunch EU summit.

The FTSE 100 index ended down 21.81 points, or 0.4 per cent, at 5,546.91, after a choppy day when the index hit an intra-day high of 5,631.88.

The senior German government official, briefing reporters on condition of anonymity, said Berlin is increasingly pessimistic about the chances of a deal, accusing some governments of failing to grasp the gravity of the situation.

Joshua Raymond, market strategist at City Index, said: There is every chance that with the stakes so high and all investor attention towards developments in Brussels, we could see a very edgy and nervy market over the course of Thursday and Friday’s sessions, with prices reacting to all news, rumour and speculation out of Belgium.

Traders said that any surprises from the European Central Bank, which holds its last monetary policy meeting for the year today -- with an expectation for a rate cut -- could also trigger sharp moves in the markets.

ICAP dropped 4.4 per cent, the biggest FTSE 100 faller, as traders cited the impact of a downgrade of the inter-dealer broker by Morgan Stanley to “equal-weight” from “overweight”.

Traders said the downgrade include a 2012-13 forecast for reduced earnings in the European banking sector by 7-9 percent to reflect the impact of further de-leveraging and weaker underlying economic prospects.

Despite a likely recession in the euro zone next year, Citigroup said it remained bullish on European equities, which it said are poised to deliver returns of 15-20 percent in 2012.

Among FTSE 100 risers, Burberry climbed 0.8 per cent as Liberum Capital started coverage of the luxury goods firm with a “buy” rating and 1,535 pence 12-month price target.

EUROPE

European shares slipped back slightly in cautious trade ahead of the EU summit, amid uncertainty about the chances that a comprehensive deal would be reached to help end the regions debt crisis.

If they (European leaders) just say were going to have some budget limits, but no one is going to enforce them, the market is going to react to that negatively, said Bob Parker, senior adviser at Credit Suisse.

The FTSEurofirst 300 index of top European shares fell 0.1 per cent to a provisional close of 988.41 points, after earlier hitting 1,002.20, its highest level since late October.

Stocks fell in most sectors, with financials among the biggest losers. Dutch insurer and banking group ING fell 4.8 per cent after saying it would take a charge of up to €1.1 billion on a US insurance portfolio.

US

US stocks were little changed in choppy early trading as investors weighed high expectations about an upcoming euro zone summit against headline-driven selling.

An agreement earlier in the week between Germany and France on tighter fiscal controls for the euro zone had triggered buying, but expectations may have gone too far, analysts said.

The comments from the unnamed German official that Berlin was increasingly pessimistic about the chances of a deal took the winds out of a two-day US stocks rally. Still, the market has been resilient, with bearish developments, including Standard Poors euro zone downgrade warning on Monday, failing to trigger massive selling.

(Additional reporting Reuters)