Europe’s main stock markets mostly drifted lower yesterday, as focus again shifted to the fate of Italy’s troubled bank Monte dei Paschi.
Trading was tentative in the runup to the end of year holidays and the Dow Jones’ attempt to hit the landmark 20,000 mark fell short, analysts noted.
“Another drab day of pre-Christmas trading,” bemoaned Spreadex analyst Connor Campbell, eyeing the release of US third-quarter economic growth data on Thursday as a possible source for more market dynamism.
London’s benchmark FTSE 100 index closed slightly lower, down 0.04%, while in the eurozone, Frankfurt’s DAX 30 was 0.03% higher and the Paris CAC 40 lost 0.3%.
The three indices had closed higher on Tuesday, with investors looking beyond fatal attacks in Germany and Turkey to focus on an upbeat outlook for the US economy, dealers said.
Stocks in Monte dei Paschi di Siena tumbled yesterday as investors feared that the troubled Italian bank’s efforts to find billions of euros quickly are all but doomed.
Shares fell to a record low of €15 in morning Milan trading, but pared losses to close 12.1% lower at €16.30.
The Italian parliament approved a plan to set aside €20bn ($20.9bn) to help Italy’s ailing banking sector which is buckling under bad loans.
Analyst Jasper Lawler, of London Capital Group, said the approval was a “welcome backup” for BMPS, the world’s oldest bank and Italy’s third-biggest, but was “not the end of the road”.
“Use of public funds risks running straight into the brick wall that is the ‘European Bank Resolution & Recovery Directive’ that says investors have to share some of the burden with taxpayers,” he said in a note to clients.
Spanish banking stocks also fell after a European court ruled lenders must reimburse customers who signed mortgage contracts that prevented them benefiting from a steady drop in interest rates.
US stocks fell, with FedEx dropping on disappointing earnings and Twitter tumbling on a key executive’s departure.
Analysts said a sudden shift in mood still could push the Dow above the 20,000 milestone in the session.
“There is potential for a buying party to break out at any point,” said Briefing.com analyst Patrick O’Hare.
Elsewhere, most Asian markets turned higher as investors refocused on the global economy after the Berlin Christmas market attack and the shooting of Russia’s Turkish ambassador.
“Noteworthy is the resilience of equity markets and low volatility in the face of two horrific terrorist attacks in Europe,” Jason Wong, a currency strategist at Bank of New Zealand in Wellington, wrote in a note to clients Wednesday.
“They seem to have had little impact on the market,” he said.
Hong Kong added 0.4% yesterday after suffering a four-day sell-off. But in Tokyo the Nikkei ended down 0.2%, having risen for 10% in the previous 11 sessions.
World markets have been on the rise since President-elect Donald Trump’s November 8 election win as dealers bet his plans for big state infrastructure spending, tax cuts and deregulation will fire the US economy.
In London, the FTSE 100 down 0.04% to 7,041.42 points; Frankfurt — DAX 30 up 0.03% to 11,468.64 points and Paris — CAC 40 down 0.3% to 4,833.82 points at the close yesterday.
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