Anxious investors watching and waiting for Europe
In a quiet before the storm, investors have been sitting on their hands waiting for a European summit Friday that some commentators say is a do-or-die moment for the European economy.
European Union leaders will meet in Brussels to consider a plan put together by German and French leaders aimed at integrating the continent's finances more fully.
There is hope that the plan can finally resolve the debt crisis that has been roiling the European economy for more than a year. After a number of piecemeal solutions have failed to stop the spread of the crisis, many economists say that a large-scale change in the structure of the European Union provides the only possible solution. As the meetings approach, each rumor out of one of the European camps has had the ability to shake investors.
"It’s extremely hard to keep up at the moment and extremely hard to analyse as even if ideas never see the light of day their mere discussion seems to have the ability to move markets," said Jim Reid, a strategist at Deutsche Bank.
The latest such comment to cause waves came from a German politician, who told reporters hours ago he was skeptical that leaders would be able to reach a deal.
"I have to say today, on Wednesday, that I am more pessimistic than last week about reaching an overall deal," Reuters reported the anonymous official as saying. "My pessimism stems from the overall picture that I see at this point, in which institutions and member states will have to move on many points to make possible the new treaty rules that we are aiming for."
These comments helped send European markets down at the end of the day, and American markets down at the beginning -- though they quickly headed back up and began wobbling again. The Standard & Poor's 500 was recently down 1.4 points or 0.1% to 1,257.06, while the Dow Jones industrial average was up 25.80 or 0.2% to 12,175.93.
Leading indexes ended the day down 0.6% in Germany and 0.1% in France.
In addition to the EU meeting Friday, the European Central Bank will be meeting Thursday to consider steps they might take to help the situation. But while the bank could lower interest rates to help boost the economy, officials have said that they will not pull out their big guns until a more comprehensive fiscal agreement is reached.
"The bank looks set to announce at least some further action soon (perhaps next week) but the idea that it is about to fire a 'silver bullet' right into the heart of the debt crisis still looks very optimistic," said John Higgins, an economist at Capital Economics.
-- Nathaniel Popper
Photo: A trader on the floor of the New York Stock Exchange. Credit: Justin Lane / European Pressphoto Agency