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European stocks drop after technical rally

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(Globalpost/GlobalPost)

Leading European stock markets fell on Wednesday as dealers locked in profits from a technical spike a day earlier, while Vodafone shares were also hit by US telecoms operator Verizon's denial that it was preparing a takeover bid for the British group.

European equities had rallied in thin trading on Tuesday, with Frankfurt and Paris closing up almost 2.0 percent each, after dealers returned to their desks from the Easter holiday weekend to digest developments over the Cyprus debt crisis.

In afternoon trade on Wednesday, London's FTSE 100 index of leading companies was down 0.38 percent at 6,466.23 points.

Frankfurt's DAX 30 dipped 0.04 percent to 7,940.30 points and in Paris the CAC 40 was off by 0.44 percent at 3,788.80.

"Yesterday's gains came in spite of a slew of poor economic data," said Chris Beauchamp, market analyst at IG trading group. "In a neat reversal, today we are seeing a modest pullback."

In New York, US stocks brushed off a weak employment report and opened slightly higher, with the Dow Jones Industrial Average adding 0.08 percent to 14,673.46 points.

The broad-based S&P 500 edged up 0.06 percent to 1,571.24, while the tech-rich Nasdaq Composite increased 0.15 percent to 3,259.64.

Back in Britain, Vodafone's share price dropped 1.04 percent to 190.00 pence after Verizon distanced itself from press speculation regarding a potential merger with the British group.

"As Verizon has said many times, it would be a willing purchaser of the 45 percent stake that Vodafone holds in Verizon Wireless," the US company said in a statement.

"It does not, however, currently have any intention to merge with or make an offer for Vodafone, whether alone or in conjunction with others," Verizon said in a statement filed Tuesday with the Securities and Exchange Commission.

Various media reports had said that Verizon was mulling a joint attack with AT&T that would see the pair divide up Vodafone assets.

Market focus also remained firmly on Cyprus, with the International Monetary Fund on Wednesday agreeing to provide approximately one billion euros to the 10-billion-euro rescue plan for the cash-strapped eurozone nation.

This would be through a three-year 891-million-euro Special Drawing Rights loan, announced IMF managing director Christine Lagarde.

The European Central Bank (ECB) will meanwhile hold off from cutting rates or announcing any other policy moves at its meeting Thursday so as to keep up pressure on governments to solve the eurozone's crisis, analysts said.

The ECB has never hesitated to act as firefighter in the long-running crisis, which seemed to have abated until political gridlock in Italy and the crisis in Cyprus sent shockwaves through financial markets once again.

Also Thursday, the Bank of England is expected to vote to maintain both its record-low interest rate and level of cash stimulus as investors wait to see whether Britain's economy has re-entered a period of recession.

In foreign exchange trade Wednesday, the euro rose to $1.2830 from $1.2813 late in New York on Tuesday. Gold prices dropped to $1,568.50 an ounce from $1,583.50.

Earlier in the day, Tokyo stocks jumped as the yen weakened and the Bank of Japan started a key two-day policy meeting, while shares in other major Asian markets fell for the most part. Tokyo gained 2.99 percent to 12,362.20. Sydney ended 0.56 percent weaker at 4,957.7 and Seoul lost 0.15 percent to 1,983.22.

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http://www.globalpost.com/dispatch/news/afp/130403/european-stocks-drop-after-technical-rally-0