European Shares Seem Stuck in Neutral

Mar 10, 2010 — New York Times

European shares slipped back into a now-familiar pattern on Wednesday, once again trading within a narrow range.

A market surge that began a year ago appears to have run out of steam. Traders are no longer looking for anecdotal evidence that a recession is easing and now they want to see signs of sustained growth.

Oil prices rose in pre-market trading. The dollar strengthened against other currencies, particularly the British pound, which continued to founder after unimpressive industrial output figures.

In London, the FTSE 100 index was 3.82 points, or 0.1 percent, higher, while the DAX in Frankfurt rose 11.33 points, or 0.2 percent. The CAC-40 in Paris was up 13.39 points, or 0.3 percent.

Wall Street was expected to open largely flat. With little economic data released since last week’s better-than-expected jobs report, investors have not made any big moves this week.

In Portugal, the financially strapped government raised 990 million euros ($1.34 billion) in a bond auction that had more bids than bonds available, suggesting that market concerns are easing about the country’s ability to pay off its debts. Alberto Soares, president of the Portuguese debt agency, said bids worth 1.58 billion euros ($2.15 billion) were received for the April 2021 bonds at a rate of 4.17 percent.

“It went very well,” Mr. Soares said.

The auction came two days after the government unveiled the outline of a four-year plan intended to allay fears it could face similar problems to Greece, though Portugal’s debt levels are lower than Greece’s.

In Asia, news that Chinese exports soared nearly 46 percent in February from a year earlier did little to prompt any sustained buying. Though the report raised hopes that global demand was recovering, it reinforced concerns that Chinese monetary authorities may raise interest rates or reserve requirements for banks. Shanghai’s main stock market ended 0.7 percent lower at 3,048.93.

Japan’s Nikkei 225 stock average shed 3.73 points to 10,563.92, while Hong Kong’s Hang Seng ended flat at 21,208.29.

Most of the interest Wednesday was on Britain after Prime Minister Gordon Brown confirmed that the annual budget statement will be on March 24, meaning that it is even more likely that the British general election will be on May 6.

“How having a budget that close to an election at a time when there is no room for fiscal largess can be good for the Labour’s chances of winning the election escapes me,” said Kit Juckes, chief economist at the ECU Group. “At least the timetable is getting clearer, however, and the massive cloud of uncertainty over the U.K. will lift before too long.”

The state of the British economy is expected to be a major campaign issue. It emerged hesitantly from an 18-month long downturn at the end of last year, but gross domestic product growth remains weak and many fear a “double dip” recession.

“We dare not risk the recovery,” Mr. Brown said in prepared remarks for a speech on the economy on Wednesday. “For our task above all else is to preserve and expand the jobs — and lift the standards of life — of the British people. We are weathering the storm, now is no time to turn back.”

The pound traded as much as 0.8 percent lower at $1.4875, following the news that the recovery in Britain’s industrial sector ground to a halt in January. Official figures showed that industrial production fell 0.4 percent in the month, with manufacturing output down 0.9 percent.

Though the industrial sector only accounts for around 18 percent of the British economy, the figures reinforced fears that the British economy may contract again in the first quarter.

The pound has been undermined in recent weeks by growing concerns about the coming general election following the closing of the gap between the opposition Conservative Party and the governing Labour Party in a raft of opinion polls. Investors are worried that an unclear election outcome where no one party gets an overall majority may stymie attempts to lower borrowing.