Markets seek clarity over debt crisis

Eurostoxx 50: 2,176.64 (-17.39) Frankfurt DAX: 5,578.42 (-50.02) Paris CAC:2,995.62 (-27.76)

EUROPEAN SHARES snapped a three-day winning streak on yesterday as hopes for imminent political action to contain the region’s debt crisis were capped by a lack of detail, leaving equities on course to rack up a fifth straight month of losses.

Given the scale of recent gains, however – more than 7 per cent – the pullback was relatively muted and in low volume that showed a lack of willingness among some investors to take aggressive positions ahead of quarter-end, traders said.

Financial services led fallers across the region after hedge fund Man Group , down 25 per cent in heavy volume more than four and a half times its 90-day average, reported large outflows over the summer.

Adding to the sector’s woes were proposals for a financial transaction tax from the European Commission, whose plan for a 0.1 per cent tax on stock and bond trades hit exchanges such as Deutsche Boerse.

Elsewhere, the downwards move was led by a fresh slide in commodities and commodity stocks such as Antofagasta , down 5.9 per cent, and BHP Billiton, down 4.1 per cent, on persistent concern about the growth outlook.

For the broader market the focus remains firmly on the twin macroeconomic headwinds of slowing economic growth and the euro zone debt crisis.

International auditors returned to Greece as Athens looks to secure the funds needed to avoid a near-term default, which Germany said is needed before any fresh talks over Greeces second bailout package.

The uncertainty is huge in the complex political process were seeing played out, said

Peter Sullivan, head of equity strategy for the USand Europe at HSBC, who recommends a focus on high-yield stocks to counter that uncertainty.

Key to the recent gains has been a belief politicians will boost the regions bailout fund past the 440 billion euros level agreed in July –even though this has yet to be signed off by national parliaments, including in Germany.

A London-based portfolio trader at a US investment bank said the market had started to “discount away the potential for a downwards 10 to 15 per cent move because of (any) default of Greece. – (Reuters)