Debt Crisis: Stocks flat, euro lower ahead of European summit in Brussels
STOCKS were flat to lower, the euro fell against the US dollar and Spanish borrowing costs jumped on Tuesday on doubts about the outcome of a European summit this week on the debt crisis.
Investors, fearing Europe's leaders would make little meaningful progress in solving the region's worsening problems at the talks Thursday and Friday in Brussels, sent the euro to its lowest against the dollar in more than two weeks.
Spain's sale of short-term debt resulted in a near tripling of its borrowing costs. Spain paid its highest short-term borrowing rates in over six months when it sold just over €3bn of three- and six-month Treasury bills.
In the United States, data showing a more severe deterioration in consumer confidence stoked concerns about slowing US growth.
They were offset by a another report pointing to a surprisingly strong April rise in home prices.
Anxiety over a global economic slowdown underpinned by the fiscal troubles in the euro zone led analysts to conclude any bounce in stock prices could be short-lived.
"There is not a reason in the world to buy the market this morning," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.
Investors pared their safe-haven holdings in gold as well as U.S. and German government debt.
They bought Brent oil futures, which rose above $91 a barrel as a strike in Norway threatened North Sea supply, on expectations of falling U.S. crude inventory and rising tension over Syria.
In late morning trading, the Dow Jones industrial average was down 14.83 points, or 0.12pc, at 12,487.83. The Standard & Poor's 500 Index was up 0.72 points, or 0.05pc, at 1,314.44.
The Nasdaq Composite Index was up 5.12 points, or 0.18pc, at 2,841.28.
The FTSEurofirst 300 index of Europe's top shares was essentially unchanged at 986.34 points, wiping out an earlier 0.4pc rise.
MSCI's world equity index dipped 0.12pc at 1,186.81, adding to three straight days of losses.
In the currency market, the euro fell 0.3pc against the dollar at $1.2463 after touching $1.2440, its lowest level in more than two weeks.
The dollar firmed against other major currencies as the euro weakened. The dollar index was up 0.09 percent at 82.577.
"The euro is going to trend lower, but I don't think you're going to see any large moves ahead of the summit," said John Doyle, senior strategist at Tempus Consulting in Washington.
"I don't think, realistically, that anyone is expecting a magic bullet to come out of this meeting and to fix all the underlying problems in Europe."
Spain's formal request on Monday for European aid along with a downgrade by Moody's of 28 of its banks, plus news that Cyprushad become the fifth euro zone member to request a bailout, curbed the appetite for riskier assets.
German Chancellor Angela Merkel was quoted as telling a meeting of one of the parties in her coalition on Tuesday that she does not think Europe will have shared total debt liability in her lifetime.
Finance ministers of the four biggest euro zone economies were holding last-minute talks in Paris on Tuesday to try to narrow differences on how to manage the crisis.
The summit will discuss a plan to create a euro zone treasury which could issue regionally backed bonds as the final stage of a fiscal union but with a recognition that this may take years to implement.