European stocks edge lower
European stocks slipped and Spanish bond yields crept up today as investors banked some of their recent gains and refocused their attention on the economic outlook and potential hurdles for the euro zone's crisis-fighting plans.
German Bund prices rose 16 ticks, clawing back some of their sharp falls from Friday when markets across Europe reacted to news the US Federal Reserve would pump $40 billion a month into the economy until the jobs market improves.
Wall Street was also seen opening in negative territory having ended last week with the S&P 500 at its highest in almost five years.
Sentiment across markets remains broadly unchanged, however, with tests of new multi-month highs expected in the coming weeks for stocks and the single currency. "Nearer-term the liquidity is undoubtedly market friendly but it doesn't necessarily change the fundamental problems that still lie ahead," said Deutsche Bank strategist Jim Reid. "We think Europe will go back to worrying about this (growth prospects for weaker members) in Q1 2013 in spite of the ECB move... As for the US... there's no reason to believe an additional injection of liquidity will suddenly catapult this recovery."
At 1.30pm (Irish time), the FTSEurofirst 300 index of leading European stocks was down 0.3 per cent at 1,116.9 points, pulling back from a 14-month high hit in the previous session. World stocks, meanwhile, were down 0.21 per cent.
Asian stocks were generally higher overnight, with the MSCI Asia ex-Japan index hitting a 4-1/2 month high. Tokyo markets were closed although tensions between Japan and China over disputed territory bubbled in the background.
"There is still good upside potential for stocks as we are re-pricing the 'non-break up' of the euro zone. We've just started to realise all the downside that came from the debt crisis," Louis Capital Markets trader Jerome Troin-Lajous said.
"Now, the main signal we need that would fuel this rally won't be coming from the economic outlook, it will come from the investment flows. A lot of foreign investors have been strongly 'underweight' European stocks and should start to switch out of bonds and out of US equities and into European stocks."
Commodities including oil, gold and copper - all of which had risen strongly last week - levelled off today.
Fund flow data from EPFR showed Europe equity funds posted their biggest net inflows since early May in the week to September 12th, as the ECB action encouraged more investors to take on equity risk and move out of conservative debt.