Global stocks fall again ahead of EU summit

Pedestrians pass an electronic stock board of a securities firm in Tokyo on June 28, 2012.
AP Photo/Koji Sasahara

(AP) LONDON - Doubts over the ability of European leaders to cobble together measures to deal with the debt crisis kept markets on edge Thursday.

Stocks fell and the euro edged lower as expectations for the European Union summit that starts later in Brussels diminished in the wake of comments from German Chancellor Angela Merkel that jointly-issued eurobonds would not resolve Europe's debt crisis on their own.

Many in the markets as well as a number of Europe's leaders, including those from France, Italy and Spain, think eurobonds are a key ingredient in the resolution of the crisis as they would help lower indebted countries' borrowing costs.

But Merkel is reluctant to expose Germany to new potential costs and is concerned that such bonds would ease the pressure on countries like Greece and Spain to reform their economies.

"In the past, there's been a lot of optimism leading into these summits, sending stocks and other risky assets higher," said Craig Erlam, market analyst at Alpari. "With so much experience now of these summits producing nothing, a wait and see approach is now being taken. "

In Europe, Germany's DAX was 1.6 percent lower at 6,127 while the CAC-40 in France fell 1.1 percent to 3,029. The FTSE 100 index of leading British shares was 0.9 percent lower at 5,472.

Much of the FTSE's fall was due to the performance of its banks, notably Barclays PLC, which dropped around 5 percent a day after it was slapped with fines totaling $453 million for the manipulation of key interest rates.

Wall Street was also poised to open lower, with both Dow futures and the broader S&P 500 futures down 0.7 percent.

The euro was also being dogged by lack of optimism over the summit and was trading 0.4 percent lower at $1.2430.

Figures showing that German unemployment fell only modestly to 6.6 percent in June - a month that usually sees big demand for seasonal jobs - added to the prevailing sense of unease.

Earlier, a few Asian markets posted gains as they tracked gains in the previous session in Europe and the U.S. following positive housing and manufacturing reports out of the U.S. on Wednesday.

Japan's Nikkei 225 rose 1.7 percent to 8,874.11. South Korea's Kospi rose marginally to 1,819.18 while Hong Kong's Hang Seng gave up earlier gains to fall 0.8 percent to 19,025.27.

Mainland Chinese shares lost ground, with the benchmark Shanghai Composite Index down 1 percent to 2,195.84, the lowest closing in almost five months. The Shenzhen Composite Index lost 1 percent to 909.28.

Oil prices fell below the $80 a barrel mark as sentiment in the markets turned sour. Benchmark oil for August delivery dipped 36 cents at $79.82 a barrel in electronic trading on the New York Mercantile Exchange.