FTSE treads water as investors await EFSF details

Markets across Europe gave a mixed performance following Thursday’s excited trade as investors awaited more news on the practicalities of the eurozone deal.  

The FTSE 100 index shed 0.35%, or 20 points, to 5,693, and the Mid-250 index added 0.37%, or 40 points, to 10,773.

Klaus Regling, head of the European Financial Stability Facility (EFSF), travelled to Asia on Friday to encourage the Chinese and others to buy the facility’s bonds, which should provide a safety net for eurozone countries.

There has been much speculation about the possible outcome of the visit, but Regling has played down the visit, stating that he doesn’t expect to return with a concrete deal.

Doubts may well persist into next week, when details on the package and who will back the EFSF should become known.   

Yusuf Heusen, sales trader at IG Index, said: ‘Looking into next week, there’s still time for the analysts to pick over the detail of the European package.

‘There are certainly some potential pitfalls here, so again at first glance it’s surprising how much the show of unity is left counting for.’

An €8 billion Italian bond auction disappointed, as demand was lower than usual. The package failed to restore appetite for risk, and yields peaked at 5.9%.

In the UK banks made a surprising turnaround to become the top fallers. Lloyds TSB (LLOY.L) fell 1.9p, or 5.2% to 35p; Barclays (BARC.L) dropped 8.8p, or 4.2%, to 201p; and RBS (RBS.L) shed 1p, or 3.6% to 26.3p.

Michael Hewson, analyst at CMC Markets, said: ‘Reminders of risk aren’t too far away after Italy sold 10-year bonds at post-euro record highs above 6%, reminding investors that the state of Italy’s finances remain a key concern. The biggest fallers are in the financial sector, with Man Group (EMG.L), Lloyds, RBS and Barclays giving up some of yesterday’s strong gains, probably prompted by Italy’s disappointing bond auction results.’

Other stock markets in Europe also gave a mixed performance: Germany’s DAX index added 0.14% to 6,346, France's CAC 40 index shed 0.49% to 3,351, and the FTSEurofirst 300 index of top European shares dropped 0.23% to 1,017.

New UK data showed that consumers are increasingly pessimistic about the economy. The outlook in a GfK study fell to -32 in October from -30 in September, and is now at its lowest level since February 2009.