All eyes remain on Europe as investors try to figure out whether European leaders are able to get on the same page about the measures needed to resolve the region’s debt crisis.
Earlier in the day, the Stoxx Europe 600 index sank 1.5 percent amid concern about the stalemate over proposals to bolster the region’s rescue fund ahead of this weekend’s summit of European leaders. Today, German Chancellor Angela Merkel cancelled a planned speech to parliament on Friday.
In afternoon trading in New York, Wall Street was mixed. The Dow Jones Industrial Average gained 0.20 percent and the Standard & Poor's 500 Index advanced 0.29 percent. The Nasdaq Composite Index fell 0.33 percent.
“All bets are off,” Tom Wirth, senior investment officer at Chemung Canal Trust in Elmira, New York, told Bloomberg News. “We’re just watching how all this plays out. I don’t know that we are close to resolution in Europe, but perhaps we’re closer to understanding what’s going to happen in the long-term.”
European governments might unleash as much as 940 billion euros (US$1.3 trillion) to combat the debt crisis by combining the temporary and planned permanent rescue funds, Bloomberg reported, citing two people familiar with the discussions.
As an October 23 summit of European leaders is unlikely to yield concrete results, there will be a second one within three days.
"Sunday's summit is unlikely to produce any real decisions, the real stuff will have to be done on Wednesday or even Friday," one senior euro zone source told Reuters. "It will be another euro zone leaders' summit."
The euro was last 0.2 percent weaker on the day at US$1.3728.
Today, Germany slashed its forecast for 2012 growth to 1 percent, from 1.8 percent, and eased its outlook for this year to 2.9 percent from 3 percent.
"The pace of expansion has slowed down, as we expected," Germany’s Economy Minister Philipp Roesler said, according to Reuters. He added that "our economy remains on a growth path."
In the US, data released today were cause for cautious optimism.
Factory activity in the U.S. Mid-Atlantic region recovered in October and the number of Americans claiming new jobless benefits declined last week.
Even so, a drop in sales of previously owned homes and a benign increase in a gauge of future growth were clear reminders that the outlook remained uncertain.
"The numbers we have seen today provide some hints that the domestic economy is doing a little bit better, even with the challenges that are unfolding in Europe," Michael Strauss, chief economist at Commonfund in Wilton, Connecticut, told Reuters.
(BusinessDesk)
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