The FTSE 100 moved steadily lower during the afternoon, as light volumes due to the closure of the US for Thanksgiving meant that traders remained cautious.
Germany did its bit to knock back gains after Chancellor Merkel said that she remained opposed to joint eurobonds.
By 3.30pm (London time), the FTSE 100 was down by 0.44% at 5117.1, and the FTSE 250 had risen 0.2% to 9589.3. European financial spread betting markets were also subdued, down 0.3% in Germany, and up just 0.02% in France.
Bunds v gilts
In a development that has prompted wry smiles at the Treasury and No. 11 Downing Street, benchmark yields for gilts (ie bonds issued by the British government) have fallen below those of Germany, which technically suggests that the British economy is in better shape than Germany's.
While the German economy does have to cope with dragging the rest of the Eurozone with it, it is likely that the increase in bund yields (which occurs when there is a lack of demand) is an indication of two things.
Firstly, investors are wary of the negative impact on the export-led German economy if the Eurozone breaks up, or enters a full-blown recession, as a result of the crisis. Secondly, there has been such a rush for bunds as a safe haven that the yield has been driven down to the point where the actual return on investment is quite meagre.
The UK's situation remains perilous, and the chancellor should certainly not take the lower yields as an invitation to borrow more.
France presses for ECB action
French officials have been working overtime of late, in an attempt to convince their German counterparts to allow the ECB to be used to stem contagion in the Eurozone debt crisis.
Ostensibly, the French are arguing that an active role for the ECB would help pull Spain and Italy back from the brink of the abyss, but in reality the actual reasoning behind their lobbying is to protect France, whose borrowing costs have edged higher in recent days.
Everyone is keenly aware that France will be the next Eurozone domino if Spain and Italy are lost. Paris appears to be tying this aim with a willingness to accede to German plans for treaty changes.
This might actually offer some sort of pathway to a solution to the crisis, if the two nations, long viewed as the two powerhouses of the EU, can hammer out an agreement that involves both a greater role for the ECB and an increase in inter-governmental cooperation.
In a mini-summit between France, Germany, and Italy, little of note has really emerged, aside from a reiteration by Chancellor Merkel that Germany remains opposed to the idea of eurobonds, or 'stability bonds' as they are now called, since any mention of the euro seems to send investors fleeing in terror.
As a result, the euro has now lost most of the gains it made earlier this morning, while Italian bonds are back in the bailout danger zone, above 7%.
Pennon sees sales continuing to flow
Water company Pennon shed 3.2% to 675p, as online spread betting investors grew concerned about the performance of its Viridor waste division. Overall pre-tax profit was up 11.6%, to £107.4 million, while the dividend was increased by 9.6% to 8.22p. Increased revenues at Southwest Water were offset by a number of customers switching to a metered tariff, reducing revenues.
Viridor saw growth slow, as its recycling and landfill services suffered a drop in demand due to the more uncertain global economic climate.
Thomas Cook books in for restructuring
One of the events of the day has actually been a non-event - the absence of Thomas Cook's results. The holiday company had planned to release full-year figures today, but financing problems, as announced on Tuesday, prompted the data to be delayed into next week.
The company now looks to be headed towards restructuring, with one of the banks close to the company saying that it wanted to see a swift end to the current malaise. The shares are up 30% today, to 14.5p, while those of larger rival TUI Travel, which had been affected to a lesser degree by Thomas Cook's rapid fall on Tuesday, edged back 1.6% to 151.5p.
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'Online Spread Betting: Pennon Shares Down on Concerns Over Waste Division', Article by IG Index, last update: 24-Nov-11
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