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Germany still opposed to euro bonds

Following a relatively positive start to the trading day across Europe, it wasn’t long before markets took a nose dive on comments made by Angela Merkel during a press conference in Strasbourg. Flanked by French president Nicholas Sarkozy and Italian Prime Minister Mario Monti, the German Chancellor affirmed that she sees no reason for euro bonds, followed by some uninspiring words implying European leaders will work closely together. The trio agreed that they won’t make demands on the ECB and would respect its inflation fighting mandate, despite many in the market seeing this as the only institution left with the swiftness and firepower to stem the crisis.

Investors are clearly concerned that Germany, which favours a step by step approach to integration via changes in the EU’s treaty, is refusing to give any ground on any of the more immediate resolutions that are required to prevent contagion, e.g. letting the ECB act as a lender of the last resort. This came despite Germany’s disappointing bond auction yesterday which many had hoped would have spurred Merkel into action now that the crisis has reached Europe’s core.

On the FTSE 100, there was an uncharacteristic mix of winners and losers, traditionally defensive stocks were hurt particularly badly with Shire, National Grid and GlaxoSmithKline amongst the biggest losers on the day. Banks and miners populated the top of the index possibly a result of recent underperformance. The index of blue chips managed to pare its Merkel induces losses closing down around 0.25% at 5127.5.

This was posted in Bdaily's Members' News section by John Dance .