US stocks erased their opening gains and joined European markets in negative territory, amid fears that division within the Eurozone could slow down the delivery of a plan to stem the region’s sovereign debt crisis.
By 3.30pm (London time) the FTSE 100 slid 1.36% to 5221.99, while the broader FTSE 250 fell 1.01% to 10,024.69. On Wall Street, the Dow Jones traded marginally higher at 11,217.33, while the S&P 500 was down 0.16% at 1173.49.
European Commission fails to calm market jitters
European Commission president Jose Manuel Barroso urged the European Central Bank this morning to do everything in its power to maintain financial stability in the Eurozone, saying that the EU faced the biggest challenge in its history.
Additional upbeat comments which reiterated that Greece will remain a member of the Eurozone saw a short-lived improvement in spread betting market sentiment.
Mr Barroso set out a range of steps the Eurozone needs to accomplish in order to stem its debt crisis and prevent contagion to other nations, including rapid approval to bolster the European Financial Stability Facility (EFSF) emergency bailout fund.
He suggested that the European Commission was also looking at ways to increase the strength of the EFSF fund, possibly through some form of leverage, including accelerating the introduction of the permanent crisis resolution mechanism, the European Stability Mechanism.
He also expressed his belief that the European Central Bank will do whatever is necessary to ensure the integrity and financial stability of the Eurozone.
Furthermore, the Commission’s President announced the introduction of two measures, which are seemingly unpopular among a number of European nations.
He announced that the Commission will present options on common Eurozone bonds in the coming weeks, and proposed a region-wide financial transactions tax on bond and stock trades, which would hopefully generate €55 billion a year. However, Britain quickly reiterated that it would only support a global levy.
Greek bailout talks set to resume
This afternoon, the European Union confirmed that negotiators would return to Greece tomorrow to continue discussing issuing its next tranche of aid. Troika leaders will return to Athens to inspect the government’s austerity plan that they want implemented in exchange for aid.
The most recent introduction of austerity measures comes after the Greek parliament passed a vote on an unpopular property tax bill, which is meant to close €2 billion holes in the budget this year and next. Eurozone ministers will then hold an additional meeting as soon as possible in October.
Meanwhile, around the Eurozone, governments are voting on the approval of expanding the EFSF emergency fund. Tomorrow, markets will watch closely to see if German chancellor Angela Merkel has done enough to receive votes to pass legislation to expand the Eurozone’s bailout fund.
US durable goods
Mixed US data released this afternoon showed that new orders dipped in August, but a rebound in a gauge of business spending supported views that the economy would likely avoid another recession. This news, however, failed to boost market sentiment.
Durable goods orders fell to 0.1% in August after a 4.1% jump in July, while non-defence capital goods orders (seen as a closely watched alternative for business spending) increased 1.1% last month after a 0.2% fall in July. Excluding transportation, orders also slipped 0.1% after rising 0.7% in July.
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'Spread Betting Market Sentiment Improves on Barroso Comments', Article by IG Index, last update: 28-Sep-11
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