European stocks ended an indecisive session little changed Wednesday, with investors reluctant to make any bold moves amid uncertainty over the outcome of Greek debt talks.
The Stoxx Europe 600 index closed up 0.1% at 253.48. The U.K.'s FTSE 100 index ended up 0.1% at 5702.37, Germany's DAX rose 0.3% to 6354.57, but France's CAC-40 index ended down 0.2% at 3264.93.
The region's indexes never quite managed to make any real headway, with traders attributing much of the caution to continuing worries about Greece, which held talks with its creditors on Wednesday. The stakes were high, after talks between the two sides broke down last week. Restructuring terms for Greece need to be settled by the end of January, if a €14.4 billion debt rollover, which is due on March 20, is to be incorporated into the debt swap deal.
News that the International Monetary Fund was looking to raise its lending resources by an additional $500 billion to $600 billion to help tackle the euro-zone debt crisis provided some relief, but this was fleeting.
"Markets were in a skittish mood today, unable to clearly decipher news flows as positive or negative," said Jeremy Batstone-Carr at Charles Stanley. "The resumption of Greek debt talks should be a positive but the outcome remains uncertain. The old story relating to a possible IMF support operation for the euro zone has been dredged up, but nobody feels entirely confident as to which countries might be prepared to 'pony up' for the IMF's coffers." He added: "In days past, this sort of news would have been greeted positively, but after a reasonable start to 2012–admittedly on thin volume–investors need more convincing."
A stark warning on global growth prospects from the World Bank early on did little to help. The Bank downgraded its growth forecast for 2012 to 5.4% for developing countries, down from a previous estimate of 6.2% and to 1.4% for high-income countries, from 2.7%. It said the world is in a precarious position, under threat of a Lehman-like crisis engulfing capital markets.
Even the seemingly bright spots of the day failed to provide any real momentum. Solid Treasury bill auctions by Germany and Portugal lent some support, but the impact was fairly limited. Germany sold €3.44 billion of two-year notes, paying the lowest yields on record.
"Demand was solid, with total bids at €7.596 billion for a 2.2 bid/cover ratio," said Newedge. "Despite two-year yields at record low levels, today's German auction was really well received."
Meanwhile, Portugal raised the maximum targeted €2.5 billion at its treasury bill auction, where borrowing costs were in line or below previous auction levels. Nevertheless, market participants remained sceptical, pointing out that Thursday will be a better test of market confidence, with France and Spain both set to auction longer-term debt.
Encouraging data releases from the U.S. also saw a muted reaction. Industrial-production figures showed a rebound in December, while the National Association of Home Builders housing-market index for January came in better than expected at 25, compared with a reading of 21 in December–marking the highest reading since June 2007.
"Today's report is quite encouraging and it looks like the housing market is finally getting out of the woods. However, the tone remains cautious as housing activity is very far from its boom period and it is not likely to become the main engine of growth any time soon," said Newedge.
By the time of the European stock markets close, the single currency was trading at $1.2819 from $1.2736 late Tuesday. Sterling last traded at $1.5409 from $1.5336. Elsewhere, the dollar was at ¥76.82 from ¥76.83.
Late in Europe, light, sweet crude for February delivery was down 57 cents at $100.14 on the New York Mercantile Exchange. Gold for February delivery was up $1.30 at $1656.90 per troy ounce late in Europe on the Comex division of Nymex.
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