By Nina Bains European stocks were stable Friday, while the euro drifted against the dollar, as investors weighed a raft of mixed global economic data against continued uncertainty over whether U.S. politicians will strike a budget deal. Euro-zone business activity shrank in December at the slowest rate in nine months, suggesting the slowdown in the region is beginning to stabilize. However, the regional picture was mixed, as German businesses returned to modest growth in December while French activity continued to shrink markedly. European equity markets drifted between small gains and losses as investors digested the data, mirroring the lack of conviction seen in Asian business. The main hub of activity was China, where equities stormed ahead after encouraging manufacturing data from the world's second-largest economy. A preliminary reading of the HSBC China manufacturing purchasing managers' index indicated an expansion in manufacturing activity for a second consecutive month, nudging up to 50.9 in December from 50.5 in the previous month. This marked a 14-month high for the index, and added to the case that China's economy is showing renewed signs of strength. In Japan, by contrast, large companies grew more pessimistic about business conditions in the three months to December, with the Bank of Japan's closely watched Tankan survey giving its worst reading since March 2010. Investors were also in wait-and-see mode ahead of the election Sunday. The yen continued to weaken slightly ahead of that election, with the Liberal Democratic Party widely tipped to win the poll and press for an aggressive easing of monetary policy. U.S. stock futures were marginally higher, indicating a mildly positive start on Wall Street. However, uncertainty over whether a deal on the U.S. budget will be struck will likely weigh on sentiment. President Barack Obama and House Speaker John Boehner met at the White House Thursday in a fresh attempt to get closer to a deal. Aides to both leaders called the discussion "frank" and added "lines of communication remain open". "As we edge closer to the end of the year, with U.S. Congress set to head into recess at the end of this week, we are getting nervous about the apparent lack of progress in U.S. fiscal cliff talks," said economists at Investec Banking group in a note to clients. "If amendments are to be made to current law to avert the cliff before year end, lawmakers officially have until the end of this week or possibly an emergency Congressional session this weekend, to agree and to vote through such changes." Meanwhile, U.K. investors shrugged off Standard & Poor's Ratings Services' decision to join Moody's Investors Service and Fitch Ratings in placing the country's government debt rating on negative outlook. Shares in Fiat pared losses after a suspension on trading was lifted. The shares had weakened significantly prior to the halt, after a report in Italian newspaper Il Messaggero said the automaker was in talks with bankers about a possible capital increase to raise funds. Fiat has since said it has no need for a capital increase. However, Alcatel-Lucent rose strongly after securing 1.62 billion euros ($2.12 billion) in new financing from Credit Suisse and Goldman Sachs in order to give the money-losing telecoms-equipment company more time to return to profitability.

Source