European stocks hit three-week low

European stocks fell to the lowest level in three weeks amid concern US politicians will fail to reach a budget agreement by the year-end deadline to avoid automatic tax increases and spending cuts in 2013.

The so-called “fiscal cliff” continued to cast a shadow over the subdued markets.

Markets were quiet due to the Christmas break. The volume of shares changing hands on the Stoxx 600 was 36 per cent lower than the 30-day average, according to data compiled by Bloomberg.

DUBLIN

The Iseq slipped 0.3 per cent as investors in Europe continued to track developments relating to the fiscal cliff.

Paper and packaging group Smurfit Kappa attracted some buying interest and the stock closed up 2.3 per cent at €9.

Bank of Ireland climbed 0.9 per cent to almost 12 cent, while building materials group CRH declined almost half a per cent to close at €15.23.

There were mixed fortunes for two other Iseq heavy-hitters, with food group Kerry falling 1 per cent to €39.83 and pharmaceutical group Elan rising half a per cent to €7.73. Aer Lingus advanced 1.7 per cent to €1.10.

Dragon Oil published a drilling update for a Turkmenistan development well and reiterated its guidance of production growth of 10 per cent for 2012. Its share price climbed 2.8 per cent to €6.57 on the Iseq.

LONDON

The FTSE 100 index of blue-chip shares fell 0.5 per cent, closing 28.93 points lower, at 5,925.37, marking its worst intraday fall since losing 0.6 per cent on November 26th.

Lingering uncertainty over the outcome of the fiscal cliff talks in the US has prevented the index from breaking through the 6,000 point level this month – a level seen by technical traders as key to propelling further moves higher.

Supermarket group Morrison climbed 0.6 per cent to 262.70 pence, while insurance group Admiral was the biggest casualty among the leading stocks, declining 1.8 per cent to 1,176 pence.

EUROPE

Stocks briefly pared losses as US president Barack Obama was said to plan to offer a scaled-back budget package at a meeting with congressional leaders, according to an unidentified Democratic aide.

However, national benchmark indexes declined in all of the 18 western European markets except in Iceland. France’s CAC 40 slumped 1.5 per cent, while Germany’s DAX slipped 0.6 per cent on its final day of trading for the year.

Bankia slumped 27 per cent to 40.4 euro cents – the biggest decline and the lowest price since it sold shares to the public in July 2011 – as the stock will be excluded from Spain’s IBEX 35 Index from January 2nd.

Vinci dropped 2.3 per cent to €35.70 after Europe’s biggest builder agreed to buy Portugal’s state-owned airport operator ANA for €3.08 billion. Vinci’s offer was the highest out of the four binding bids that the Portuguese government received for the asset.

German carmaker Porsche jumped 6.3 per cent to €61.70.

Atari retreated 7.4 per cent to 88 euro cents, the biggest drop since October 29th, after the video-game maker said it sees a “significant” fiscal-year loss. Atari also forecast that its second-half operating loss will exceed its loss in the first half and said that it is looking at all additional means of raising or preserving cash.

US

US stocks fell in early trading, as lawmakers prepared for the fiscal cliff talks. The Standard and Poor’s 500 Index lost 0.4 per cent by just after midday in New York, trimming an earlier drop of 0.8 per cent.

Energy companies led losses among the 10 main industry groups in the S and P 500, with Valero Energy and Peabody Energy sliding at least 1.7 per cent each.

Hewlett-Packard, Chevron and Exxon Mobil lost more than 1 per cent to lead declines in 27 of the 30 stocks in the Dow Jones Industrial Average.

– (Additional reporting: Bloomberg / Reuters)