MW: Europe thins gains; focus on next Italian auction
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — European stock markets bounced around in thin trading Wednesday, with investors looking past a successful Italian-bond auction to another debt sale due to take place the following day.
The Stoxx Europe 600 index XX:SXXP -0.24% fell 0.3% to 241.13 following a largely unchanged close the prior session, with volumes low and many traders still away for the Christmas and New Year’s holidays.
U.S. stocks pushed lower in the first half-hour of trading on Wall Street, as Europe pared back on gains.
European markets initially rose after a €9 billion ($11.8 billion) auction of Italian six-month bonds, which sold at an average yield that was half that of a November auction. It was covered 1.7 times, against 1.5 times prior.
“I think this is very encouraging,” said Esbjörn Lundevall, Stockholm-based equity analyst at SEB Private Banking, of the Italian auction result. But he and others said the bigger test will come Thursday, when €8.5 billion in a variety of maturities will be up for sale.
Lundevall also said markets activity remains thin between the holidays: “It’s very, very slow trading and extremely low activity, so you only need rather small amounts of money to push prices around.”
The FTSE MIB Italy index XX:FTSEMIB -0.25% trimmed a gain of over 1% to around 0.2% at 14,960. Yields also creeped up on the 10-year Italian benchmark IT:10YR_ITA -1.38% after an initial respite. That yield was last down 1 basis point to 6.88%. A basis point is one one-hundredth of a percentage point.
Spain’s 10-year benchmark ES:10YR_ESP -5.07% continued to push lower, down 27 basis points to 5.02%. A basis point is 1/100 percentage point.
Ahead of that auction, data from the European Central Bank showed the region’s banks put 452.03 billion euros ($590.4 billion) in its overnight deposit facility, topping a prior record set Tuesday. That indicates stress in the banking system and that banks are unwilling to lend to each other.
Drug stocks on the rise, banks off
Portugal’s stocks remained the day’s outperformer, following on a strong session the prior day. The PSI-20 index PT:PSI20 +0.70% rose more than 1% to 5,520.79, led by Banco Comercial Portugues SA PT:BCP +3.17% , up 3.2%.
On Tuesday, banks were on the rise in Portugal over a media report that the government could recapitalize those institutions without taking shares.
But banks fell elsewhere Wednesday as nervousness set in ahead of the Italian bond auction. The French CAC 40 index FR:PX1 -0.37% fell 0.3% to 3,093.99, with Credit Agricole SA FR:ACA -1.59% selling off 2.4% and Societe Generale SA FR:GLE -1.10% trading down 2%.
In London, where markets reopened after an extended holiday break, shares of defensive stocks rose, with grocer Tesco PLC UK:TSCO +2.56% gaining 2.5% amid indications of strong post-Christmas sales across the country.
Also helping, shares of British American Tobacco PLC UK:BATS +2.17% rose 2.2% and Imperial Tobacco Group PLC UK:IMT +1.29% added 1.3%.
The FTSE 100 index UK:UKX +0.26% rose 0.3% to 5,531.98, even as banks such as Barclays PLC UK:BARC -2.37% BCS -2.24% fell 2.5% and Royal Bank of Scotland Group PLC RBS -2.66% UK:RBS -2.29% shed 2.3%.
The German DAX 30 index DX:DAX -1.04% stumbled 1% to 5,830.64, after the prior day’s gains. Shares of Deutsche Bank AG DE:DBK -2.32% DB -3.03% lost 2.6% and Commerzbank AG DE:CBK -2.95% fell 3.3%.
Auto stocks BMW AG DE:BMW -2.14% and Volkswagen AG DE:VOW3 -2.25% both dropped more than 2%, coming off prior-day gains.
