An exterior view of the European Aeronautic Defence and Space company’s headquarters in Paris. In stock movements, shares in European aerospace giant EADS soared 7.5% to €52.86 following comments on dividends and its finances that reassured investors.
AFP
Europe’s main stock markets ended the day down yesterday after investors weighed the impact of a deal on the US budget on the reduction of monetary stimulus by Federal Reserve.
London’s benchmark FTSE 100 index slid 0.24% to 6,507.72 points, while Frankfurt’s DAX 30 fell 0.41% to 9,077.11 points and the CAC 40 in Paris slipped 0.10% to 4,086.86 points.
Milan tumbled 1.44% and Madrid shed 0.84%.
“After a bit of a slow start Europe’s markets did try and edge slowly higher today before losing momentum and slipping back, as investors weighed up the impact of the news that US politicians appear to have put the dysfunction of October behind them and agreed a budget for the next two years,” said analyst Michael Hewson at CMC Markets.
Congressional negotiators late on Tuesday reached a two-year deal on spending which President Barack Obama hailed as a sign of rare bipartisan cooperation in the strife-filled legislature.
Under an agreement in October that ended a crippling 16-day shutdown, US federal spending authority expires on January 15, when a new agreement would need to be in force.
The deal must still be approved by both houses of Congress.
US stocks opened higher on the news of the budget deal, but quickly reversed.
In midday trading, the Dow Jones Industrial Average was down 0.53% to 15,887.94 points.
The broad-based S&P 500 dropped 0.65% to 1,790.90, while the tech-rich Nasdaq Composite Index slumped 0.68% to 4,032.88.
While the budget deal is positive, Hewson noted it also removes another “obstacle to an eventual start to a possible Fed taper next week, which could be another reason why stocks are finding it difficult to rally right now.”
Investors have for some time been digesting developments for their impact on whether the US Federal Reserve will announce a cut in its stimulus programme at its policy meeting next week.
Expectations that the US central bank will start to whittle down, or “taper” the $85bn a month bond-buying scheme were fuelled on Monday.
St Louis Fed President James Bullard said that a marginal reduction could be on the cards after strong jobs and growth data at the end of last week.
“It is becoming increasingly difficult for dovish Fed members to argue against a small tapering of asset purchases this month,” said Craig Erlam, market analyst at Alpari traders.
“The (US economic) data has improved significantly, there’s no evidence of any negative impact from the shutdown and future obstacles to a sustainable recovery are now being removed.”
Gold prices dropped to $1,260.75 an ounce on the London Bullion Market from $1,266.25 on Tuesday.
In stock movements, shares in European aerospace giant EADS soared 7.5% to 52.86 euros following comments on dividends and its finances that reassured investors.
That recovers much of the 8.6% the shares fell in the previous month as investors waited for details about a major restructuring in the company’s space and defence divisions.
EADS announced Monday that it plans to eliminate 5,800 jobs by 2016, with some 1,000-1,450 possible forced redundancies.
Meanwhile shares in French-US telecom equipment maker Alcatel-Lucent rose 1.6% to €3.33 after Citigroup upgraded it to ‘buy’ as the company pushes forward with a deep restructuring plan.
The bank said its target price for the share is now €5, up from €1.90.
