LONDON—European stock markets slid Friday, as approvals to expand the European Financial Stability Facility this week prompted more questions about the effectiveness of the measure, rather than calming investors' nerves.
Even as Austria moves closer toward a vote on the proposed measures—following on the heels of countries such as Finland, Germany and Estonia—there remain doubts that a new and improved bailout facility will be sufficient to calm the euro-zone crisis. "We remain cautious on the viability of the [EFSF] idea as it requires private investors to subscribe to the bonds, it might pressure the ratings of euro-zone countries and it does not address the fiscal situation of the countries involved," ING said.
The benchmark Stoxx Europe 600 index was down 1.6% at 225.17. Frankfurt's DAX was 2.7% lower at 5488.23, Paris's CAC-40 index was off 1.9% at 2970.63 and London's FTSE 100 had slipped 1.6% to 5115.18.
Analysts at Credit Agricole added the EFSF is increasingly being seen as old news given the view that it will need deeper changes, including "leveraging" it up. "Consequently, our risk aversion remains at a highly elevated level and is showing no sign of easing. It may be difficult to turn sentiment around as we go into the final quarter of the year, especially as those investors registering profits for the year may want to capitalize on these profits rather than sit through continued volatility in the weeks ahead," the analysts said.
With these concerns in mind, traders expect stocks, the euro currency and risk assets to struggle over coming weeks unless there is a major improvement in the situation in Europe or in growth data. Markets go into the end of this week looking ahead to key events next week that include an Ecofin meeting, a European Central Bank policy announcement and the monthly U.S. jobs report at the end of the week.
On the immediate data front, there is a raft of fresh numbers due for publication Friday: U.S. personal income and spending at 8:30 a.m. ET, and both the Chicago PMI survey and the University of Michigan consumer-confidence survey.
In foreign-exchange markets, the euro erased some of its gains against the dollar Thursday following the German Parliament's approval of legislation to modify the EFSF. The single currency was at $1.3499, from $1.3599 late Thursday in New York. The dollar was unchanged at ¥76.85.
In other markets, spot gold was at $1,630.60 a troy ounce, up $13.30 in New York Thursday, while the November Nymex crude-oil futures contract was down 46 cents at $81.68 a barrel. The benchmark German government bund contract was up 114 ticks at 136.39, as investors left the equity markets in a search for this safe haven.
