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World stock markets down after Franco-German summit fails to deliver convincing debt fix
MILAN (AP) ' Global stocks fell Wednesday in a downbeat appraisal of a Franco-German summit that failed to persuade investors that a convincing fix to the eurozone's spiraling debt crisis was imminent.
French President Nicolas Sarkozy and Germany Chancellor Angela Merkel called for greater economic and political unity among the 17 nations that share the euro.
But they failed to take the decisive actions the markets had hoped for, including committing to common eurobonds that would spread the risk for the sovereign debt or strengthening a new bailout fund.
The market reaction showed little confidence in the announcements, which came on the heels of weak growth in Germany, Europe's largest economy.
"There was no talk about boosting the EFSF (European Financial Stability Facility) and not talk about eurobonds, all rather disappointing but not altogether surprising, given the political obstacles against them," said Michael Hewson of CMC Markets. "The biggest worry remains the lack of economic growth in Europe."
In Europe, Germany's DAX was 1 percent lower at 5,931 while the CAC-40 in France rose a slight 0.05 percent to 3,232. Britain's FTSE 100 of leading British shares was down 0.72 percent at 5,318.
Wall Street was poised for a fairly subdued opening later ' Dow futures were down 0.1 percent at 11,380 while the broader Standard & Poor's 500 futures fell an equivalent rate to 1,192.
Compared to last week, when turmoil gripped financial markets in the aftermath of Standard & Poor's downgrade of the U.S.'s credit rating and as Europe's debt crisis threatened Italy and Spain, trading this week has been fairly subdued. Often, trading in the second half of August runs dry up until the U.S. return from the Labor Day weekend in early September.
In the currency markets, the most activity centered on the Swiss franc.
The Swiss franc was back in demand after the Swiss National Bank failed to peg the currency with the euro, as had been widely speculated upon in recent days. Instead, the bank decided to inject more of the Swiss currency into the money markets in its latest attempt to stem the export-sapping appreciation of the currency.
"The market was heavily anticipating something along the lines of a target or a foreign exchange floor, but ultimately the SNB simply expanded their current measures," said Geoffrey Yu, an analyst at UBS.
By late morning London time, the euro was trading around 0.7 percent lower on the day at 1.1361 Swiss franc, while the dollar was 1.1 percent lower at 0.7873 franc.
Elsewhere, the euro was 0.3 percent firmer at $1.4427 while the dollar fell 0.3 percent to 76.55 yen.
Earlier in Asia, Japan's benchmark Nikkei 225 index sank 0.6 percent to close at 9,057.26 as a strengthening yen dragged down the country's vital export sector.
South Korea's Kospi, which tumbled last week amid massive foreign selling, rose 0.7 percent to 1,892.67.
Mainland Chinese shares edged lower as investors fretted over possible monetary tightening measures and the debt problems among European countries using the euro common currency. The Shanghai Composite Index fell 0.3 percent to 2,601.26 while the Shenzhen Composite Index likewise slipped 0.3 percent to 1,163.87.
Hong Kong's Hang Seng index rose 0.4 percent to 20,289.03, buoyed by Chinese Vice Premier Li Keqiang's pledge to expand the role of Hong Kong as an offshore trading center for China's yuan currency.
Oil prices rose further with the benchmark New York rate up $1.04 at $87.69 a barrel.
Pamela Sampson in Bangkok contributed to this report.