European markets mixed as traders await EU Summit output

<p>European equities were mixed on Wednesday having seen a weaker afternoon trade as investors fretted over the ability of European officials to come together and […]</p>

European equities were mixed on Wednesday having seen a weaker afternoon trade as investors fretted over the ability of European officials to come together and agree wide sweeping plans to stave Europe from financial crisis. The DAX and CAC both fell 0.5% and 0.1% respectively whilst the FTSE 100 posted gains of 0.5% points after a volatile final two hours of trading.

Whilst investors have shown tremendous patience with European leaders over the past few months to agree sincere and unilateral actions to contain Greece’s debt woes from crippling the euro region, one worries that investor patience is starting to wear thin. And what’s more, investors are no closer to being able to guess what officials have agreed by headline or the methodology on how to increase the potency of theEFSF.

We know that the Institute of International Finance, the consortium representing banks holding Greek debt, is attempting to negotiate the expected additional haircuts, a fact made in a recent statement that a ‘significant new offer’ was made to the EU, but the refusal to give any details as to what that proposal is and the public determination by some leaders to increase haircuts to at least 50%, makes this element of any deal rather clouded. Even words from some officials that involuntary haircuts was still on the table heightened concerns that a deal was far from close, whilst some may see this as more of a PR move to add pressure on banks to force a compromise.

The fact is, not many investors are ‘in the know’ and so uncertainty reigns supreme but considering equities have not lost significant ground in the midst of this uncertainty indicates many traders out there retain hopes of some form of deal.

To that end, there will be many investors in Europe tonight with firm eyes on news channels and any output from the EU Summit in Brussels will likely play a significant role in how European markets open tomorrow.

In the final few hours of trading in Europe we saw investors look to downsize risk on the uncertainty of what may come from tonight’s summit. The FTSE 100 has lost over 1% in a matter of two hours before a revival saw the UK Index close higher by 27 points at 5553.

Much of the FTSE’s gains were weighted in a positive session for mining firms, after China indicated a potential change of pace in terms of monetary policy from hawkish to dovish, which could create higher demand for basic resources. Copper prices rose strongly on the back of the speculation. Oil firms were also strong on the day, with the sector closing higher by 1% despite a 1.7% fall in crude oil prices.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.