New York - World stocks and the euro stumbled on Tuesday after the cancellation of a meeting of European finance ministers raised doubts that an upcoming summit will result in a clear plan to rein in Europe’s debt crisis.
A summit of European leaders remains scheduled for Wednesday, but the gathering of finance ministers - known as Ecofin - was cancelled because details of the meeting had not been finalised, sources told Reuters.
The worries over Europe boosted safe haven assets, driving up prices of US Treasury debt and driving the Japanese yen to a record high against the dollar. Weak US consumer data added to the gloomy sentiment and helped pushed gold up 3% to top $1 700 an ounce.
“We are inclined to believe that the cancellation of the EU finance ministers' meeting means more delays than progress on euro area talks,” said Kathy Lien, director of research at GFT in Jersey City, New Jersey.
“We won’t know for sure until Wednesday when the EU summit ends and the press conference is delivered, but today’s announcement certainly adds a degree of uncertainty in the markets.”
Officials said eurozone leaders are unlikely to provide many hard numbers to flesh out their debt crisis response on Wednesday because the size of banks’ losses on Greek bonds is still under negotiation and an increase in the firepower of the bailout fund is tough to quantify.
Also on Tuesday, Germany said it opposes a phrase in a draft conclusion for the summit that calls for the European Central Bank (ECB) to continue buying bonds in the secondary market.
The ECB has been buying Spanish and Italian bonds for more than two months in order to hold down the countries’ borrowing costs and contain the region’s debt crisis.
MSCI’s all-country world stock index fell 0.5%. The index had earlier hit its highest level since early September on signs that eurozone policymakers had neared agreement on bank recapitalisation and on how to leverage the region’s rescue fund.
US stocks were lower in midday trade. The Dow Jones industrial average was down 85.87 points, or 0.72%, at 11,827.75. The Standard & Poor’s 500 Index was down 10.93 points, or 0.87%, at 1,243.26. The Nasdaq Composite Index was down 27.93 points, or 1.03%, at 2 671.51.
The FTSEurofirst 300 index of top European shares ended 0.7% lower at 982.57 after rising to an 11-week high of 993.29 earlier.
Emerging market shares gained 0.7%. Earlier, Japan’s Nikkei closed down 0.9%.