By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — Europe stocks traded in tight ranges on Tuesday, after the International Monetary Fund cut its global-growth forecast, while resources firms found support in China adding additional stimulus measures.
The Stoxx Europe 600 index XX:SXXP -0.16% slipped 0.1% to 271.04, adding to a 1% loss on Monday.
U.S. stocks opened lower on Wall Street.
“We’re still muddling through the aftermath of one of the biggest recessions ever and that is being resolved slowly,” said Bernard McAlinden, investment strategist at NCB Stockbrokers in Dublin.
“Earnings are the near-term thing to push markets around a bit. The key thing markets will be watching is if companies’ expectations point to signs of bottoming in the global slowdown,” he said.
Banks posted some of the biggest losses, with Spain’s Banco Popular Español SA ES:POP -3.54% down 3.4% and Banco Santander SA ES:SAN -1.42% . SAN -2.19% off 1.3%.
Spain’s IBEX 35 index XX:IBEX -1.28% gave up 1.1% to 7,800.90, while the yield on 10-year Spanish government bonds ES:10YR_ESP +1.68% rose 10 basis points to 5.79%, according to electronic trading platform Tradeweb.
IMF in Tokyo
Sentiment was dented as the IMF at its meeting in Tokyo slashed its projections for global growth for 2012 and 2013.
For 2012 the fund now expects the global economy to expand by 3.3% compared with a 3.5% estimate made in July, while expected growth in 2013 was revised down to 3.6% from 3.9%. See: IMF cuts 2012, 2013 global growth forecasts
Meanwhile, the IMF said several euro-zone countries, including France and Spain, will miss their deficit targets next year, as austerity moves hurt growth prospects. See: IMF: key euro-zone nations to miss deficit targets
Read: IMF cuts Poland ‘12 growth view; sees ‘13 slower
“The IMF was basically telling central banks to tailor monetary policy to the requirements of the global economy,” McAlinden from NCB said.
“They shouldn’t think that just because interest rates are zero-bound, monetary policy can't get any looser. It was underwriting the [U.S. Federal Reserve’s] aggressive approach and served as a reminder to keep an open mind to how super-loose monetary policy could be,” he added. “Markets are quite doubtful if any of the stimulus measures will be effective.”
The IMF further urged Greece to pay more attention to fiscal structural reforms and the country’s indebtedness, amid austerity negotiations with its international lenders.
Separately, German Chancellor Angela Merkel on Tuesday went to Greece for the first time since 2007 to meet with Greek Prime Minister Antonis Samaras. See: IMF: Greece must do more for bailout demands
Europe’s finance ministers were also in the spotlight, as they were scheduled to conclude a two-day meeting in Luxembourg with Greece, Spain and firmer banking integration in focus.
The gathering got under way Monday with Eurogroup President Jean-Claude Juncker officially launching the European Stability Mechanism, bringing the euro zone’s rescue funds’ firepower to 700 billion euros ($904.8 billion).
Germany’s Finance Minister Wolfgang Schäuble reportedly reiterated at the meeting that Spain doesn't need a bailout, as the struggling country is already doing everything it can in fiscal policy and with structural reforms.
Movers
Elsewhere, the U.K.’s FTSE 100 index UK:UKX -0.33% dropped 0.4% to 5,818.69. See: Growth fears weigh on U.K. stocks; miners rise
Aggreko PLC UK:AGK -3.10% fell 3.5% after HSBC cut the provider of industrial generators and power-distribution equipment to neutral from overweight.
Miners bucked the trend and advanced, however, as China moved to support growth in the economy. The People’s Bank of China offered 265 billion yuan ($42.1 billion) via reverse repurchase agreements in an open-market operation to ease tight liquidity conditions in the local banking system. Read Asia Markets.
PBOC Gov. Zhou Xiaochuan said monetary policy must remain flexible and set with a preemptive bias to help counter the weak external environment, according to media reports.
Rio Tinto PLC UK:RIO +2.09% RIO +1.71% AU:RIO +1.46% gained 2%, Anglo American PLC UK:AAL +2.08% picked up 1.9% and BHP Billiton PLC UK:BLT +1.12% BHP +1.00% AU:BHP +0.66% added 1%.
Among French stocks, Veolia Environnement SA FR:VIE -1.18% dropped 1.5%, after HSBC cut the stock to neutral from overweight.
EADS NV FR:EAD +0.34% shed 0.1% amid merger negotiations with BAE Systems PLC UK:BA -0.40% . The boards of the two firms will decide on a strategy going forward after the bosses on both sides discuss the impasse, a representative for EADS said. See: EADS and BAE to decide strategy after CEOs consult
Shares of BAE Systems dropped 0.5%.
The CAC 40 index FR:PX1 -0.07% was down 0.1% to 3,402.73.
In Germany, the DAX 30 index DX:DAX -0.42% gave up 0.4% to 7,259.27, with BASF SE DE:BAS -1.42% off 1.3%.
Sara Sjolin is a MarketWatch reporter, based in London.
