European markets lack direction as focus turns to this afternoon 8217 s EU Summit

European markets had a fairly flat start to the trading session with the major indices struggling for direction as the start of the EU Summit weighed on investors’ minds whilst GDP data from China pushed resource stocks higher.

China’s third quarter gross domestic product grew by the 7.4% as expected, down from 7.6% in the previous quarter. Although this is the slowest pace of growth since Q1 2009, with the recent improvement in economic data, strong retail sales and industrial production there is a possibility that this is the bottom of the curve and we could expect a pick up in the coming GDP results. There are some suggestions that Q4 GDP could rebound back over 8%.

As a result of the more positive outlook for the world’s top commodity consumer, mining stocks have offered support to the FTSE 100 with Kazakhmys gaining over 2.8% and Evraz also holding firm up 2.5%.

The main focus, however, for the day will be the start of the EU Summit this afternoon. Despite the severity and number of issues which they will be discussing, market expectations are low, with little hope of any substantial decisions being taken. There have been 22 EU Summits since 2009 when the Greek crisis intensified and EU leaders have already meet four  times this year but still we do not expect the issues over a banking union, a Spanish bailout or the worsening of the Greek situation to be resolved.

At best a single supervisor for the European banking sector would be operational in 2014, however, with a clear lack of agreement between ministers trying to approve a financial transactions tax, even 2014 seems a little optimistic. The UK has already threatened to veto any measure due to its concerns over the threat that it poses to business in the City.

On a positive not this morning, Spain auctioned €4.6 billion of government debt, exceeding the top end of the €4.5 billion range.  Borrowing costs also fell on the expectations that the country will request a formal bailout soon. The benchmark 10-year average yield fell to 5.46% down from 5.67% in September, however, with yields dropping to this more sustainable level Spain does actually have some breathing space which may prevent them from requesting a bailout any time soon.