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Most European Stocks Fall as U.S Budget Talks Stall

By Namitha Jagadeesh - Dec 31, 2012


Most European stocks fell amid concern U.S. lawmakers won’t reach a budget deal in time to prevent automatic tax increases and spending cuts from coming into effect tomorrow. U.S. index futures signaled a lower opening for equities and Asian shares were little changed.

Iberdrola SA (IBE), Spain’s largest utility, slid 1.5 percent after Bolivia nationalized four of its business units. Bankia SA (BKIA) rallied 5 percent, rebounding from its record low.

The Stoxx Europe 600 Index (SXXP) declined less than 0.1 percent to 278.71 at 9:23 a.m. in London, as nine of the 18 western European markets including Germany and Switzerland were closed. The U.K. market will close at 12:30 p.m., while France, Belgium, Spain and the Netherlands will close by about 1 p.m.

“Democrat and Republican lawmakers will meet again today to present a potential deal to Senate lawmakers but time is running out and hopes are rapidly receding for a deal later today,” said Ishaq Siddiqi, a market strategist at ETX Capital in London. “Traders are taking no chances on the final trading day of the year as such, removing cash off the table in the likely event that the fiscal cliff will be triggered tonight.”

Futures on the Standard & Poor’s 500 Index signaled the U.S. benchmark index may fall for a sixth day. The contracts expiring in March traded at 1,390.6, or 0.8 percent lower compared with the equity gauge’s close on Dec. 28. The MSCI Asia Pacific Index added less than 0.1 percent today.

The volume changing hands in companies on the U.K.’s FTSE 100 Index was 65 percent lower than the average of the last 30 days, according to data compiled by Bloomberg. The volume on France’s CAC 40 was 81 percent lower.

2012 Performance

The Stoxx 600 is heading for a gain of 14 percent this year, the biggest since 2009, as the European Central Bank and the Federal Reserve boosted asset purchases. Sky Deutschland AG, the German pay-TV operator half-owned by Rupert Murdoch’s News Corp., nearly tripled this year for the best performance on the gauge. Bankia was the worst performer, plunging 88 percent.

The U.S. Senate will convene at 11 a.m. Washington time today to discuss measures to avert more than $600 billion in automatic tax increases and spending cuts, also called the fiscal cliff.

Private talks between Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell that began Dec. 28 stalled yesterday because of disputes over income tax rates, the estate tax and other issues.

McConnell said he spoke by phone to Vice President Joe Biden at least twice yesterday. House Speaker and Republican John Boehner brought his members back to Washington yesterday. He has said the House won’t act unless the Senate sends over a proposal.

Merkel Comments

In Europe, German Chancellor Angela Merkel said the economic environment will be more difficult in 2013 compared with this year.

“The reforms that we’ve agreed on are starting to take effect,” Merkel said in a New Year’s television speech to the nation, sent today in advance by e-mail. “Nevertheless, we still need a lot of patience. The crisis is far from over.”

China’s manufacturing unexpectedly expanded at the fastest pace in 19 months, a report showed today. The final reading of a Purchasing Managers’ Index was 51.5 in December, according to a statement from HSBC Holdings Plc and Markit Economics. That compares with the 50.9 preliminary reading on Dec. 14 and a final 50.5 in November. A level above 50 indicates expansion.

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