Stock prices fall as EU summit causes confusion over future
STOCKS retreated yesterday amid confusion about what was agreed at the European Union summit in Brussels.
The euro weakened against the dollar for a second day as the European Union summit failed to discuss further financial assistance for Spain, and there was also widespread confusion about when the new banking regulator would actually begin operating early next year.
Germany and France seemed to have reached agreement to enforce common banking regulation for the eurozone's 6,000 lenders by the end of this year but German Chancellor Angela Merkel appeared to backtrack just a few hours later.
"There seems to have been no union in the banking union discussion," said Francisco Salvador, a strategist at FGA-MG Valores in Madrid.
"I also wonder what they talked about if they didn't discuss Spain: Greece or growth?
"It's turning out to be a summit that will see little or no advances. No news is bad news," he said.
Shares in European banks dropped, contributing the most to the Stoxx 600's retreat following the EU summit.
In New York, the S&P 500 slipped for a second day, after rallying 2.3pc over the previous three sessions.
The MSCI Emerging Markets Index slid 0.5pc, paring its biggest weekly rally in more than a month as computer companies retreated and a Chinese central bank adviser said stimulus would be limited.
Confidence wasn't helped by worse-than-expected results from large US corporations such as General Electric and McDonald's.
Yields on benchmark 10-year German bunds dropped three basis points to 1.6pc as investors looked for safe havens.
Irish brokers were divided on the significance of the summit.
Dermot O'Leary, an economist at Goodbody Stockbrokers, said that Germany was still involved in a go-slow on banking regulation.
Ms Merkel's comments "suggest that an agreement on the legislative framework will not mean a whole lot in a practical sense".
He added that "merely agreeing on the legal procedure for banking supervision is not enough".
Over at Davy stockbrokers, economist Conall Mac Coille said that Ms Merkel's latest statement suggested capital injections into Irish banks to reduce government debt were now more likely.