European stocks opened at mixed levels Wednesday as concerns about Spain and Greece intensify, and following a rare earnings miss from Apple.
“Overall, risk aversion is set to remain highly elevated,” as no resolution to the euro-zone crisis appears to be coming soon, said Crédit Agricole Corporate & Investment Bank.
London’s FTSE 100 fell 0.4% at the open, Germany’s DAX was flat and France’s CAC-40 was 0.2% higher.
As far as Spain is concerned, it now seems to be very much a case of when, rather than if, it will require a sovereign bailout, after Catalonia—its most indebted region—said Tuesday that it was considering asking for government aid. It wants to look at the fine print of the conditions attached to central government aid before it puts in a request.
Meanwhile, reports that Greece is likely to miss a debt reduction target and need more debt restructuring have added to fears that it may exit the euro area. This comes as the International Monetary Fund suggested that the European Central Bank’s decision to not take losses on Greek debt holdings could hamper future bailouts. An IMF staff paper reviewing the ECB’s efforts on the European crisis suggested that ECB restructuring of Greek debt could make any possible program to lower Spain and Italy’s borrowing costs much more effective.
At the same time, a weaker than expected set of second-quarter numbers from Apple, which reported lower than forecast iPhone sales, is also likely to weigh on sentiment.
There are several key data points due Wednesday. Germany’s Ifo survey for July is at 0400 ET, while the first release of second-quarter U.K. gross domestic product figures is at 0430 ET and U.S. new home sales for June are at 1000 ET. Crédit Agricole Corporate & Investment Bank expects the Ifo index to have continued to edge down from relatively high levels, with current conditions weakening more significantly following a surprise rebound in June. It forecasts a reading of 104.2 from 105.3. For U.K. GDP, it is in line with consensus, looking for a 0.2% quarter-to-quarter contraction.
On Wall Street Tuesday, the Dow Jones Industrial Average slid toward its third straight triple-digit point decline as poor corporate earnings underscored growth worries and concerns mounted about Greece’s ability to pay its debts.
The DJIA fell 0.8% to 12617.32, though the blue-chip benchmark trimmed its losses after The Wall Street Journal reported that the Federal Reserve is moving closer to taking additional measures to boost the economy. The Standard & Poor’s 500-stock index fell 0.9% to 1338.31, and the Nasdaq Composite Index dropped 0.9% to 2862.99.
In Asia, markets fell Wednesday on concerns over Europe’s debt crisis and as Apple’s disappointing earnings pushed down technology manufacturers. Stocks started with deep losses, but losses moderated as the session continued, as investors started to pick up shares they deemed cheap, while comments from the IMF that China will go through a soft landing and that Beijing could apply more stimulus were taken as a positive. Australia’s S&P ASX 200 fell 0.3%, the Hang Seng Index slipped 0.7% and South Korea’s Kospi was down 1.3%.
In foreign exchanges, the euro was little changed against the dollar, steadying following recent heavy falls. The common currency was recently at $1.2066 from $1.2061 late Tuesday in New York. The dollar was at ¥78.14 from ¥78.20.
September Nymex crude oil futures were down $0.38 at $88.12 per barrel and the August Brent oil contract was down $0.38 at $103.04. Spot gold was at $1,584, up $2.40, while the September bund contract was up 13 ticks at 145.16.
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