European Shares End Mixed on Spain Uncertainty
European markets ended mixed on Wednesday after Spain’s Prime Minister Mariano Rajoy denied reports that he would be seeking a bailout this weekend.
The FTSEurofirst 300 Index traded in-and-out of the black in choppy trade and finished the day flat.
While U.K., German and Italian stocks finished higher, France's CAC 40 , finished down 0.3 percent and Spain's IBEX ended down 0.4 percent.
Spanish stocks had been buoyed on Tuesday by a Reuters report that cited European officials saying Spain was ready to seek a bailout. But Spain's prime minister later in the day dismissed the suggestion that a bailout was imminent. That impacted trading in Europe stocks on Wednesday.
Weak Purchasing managers Index (PMIs) data released on Wednesday also weighed on sentiment. Markit's Composite PMI for the euro zone, which is considered a gauge of future growth, fell to 46.1 in September from 46.3 in August.
But for most investors the focus remained on Spain.
Rebecca O'Keeffe, Head of Investment at Interactive Investor, believes that Spanish Prime Minister Rajoy's comments on Tuesday confirmed that the country is still a long way from requesting financial assistance.
"Thanks to the ECB's OMT [bond-buying program], Spanish yields are still close to 5-month lows, hence the reluctance of both Spanish and German politicians to take any sort of affirmative action," she said in a morning note.
"This is perhaps the Achilles heel of the OMT, in that it takes away the incentive for politicians to act decisively."
Another analyst Gary Jenkins at Swordfish Research believes a Spanish bailout request may be made before the end of this month, and certainly before the end of the year.
"The Spanish government has confirmed that they need to borrow some 207 billion euros from the market in 2013. Now if they were to announce that they were not going to ask for a bailout just how likely are they to be able to borrow that amount of money? Not very is the answer," he said in a morning note.
"And if you need to borrow 20 billion euros at the end of this month, why not do it after a bailout request when yields will probably be a fair bit lower than they would otherwise be?"
Meanwhile, Greece has yet to clinch a deal with troika officials over the remaining 2 billion euros ($2.5 billion) of spending cuts that it must make in order to receive further bailout funds.
In stocks news, U.K. supermarkets released trading reports on Tuesday. Both Tesco and Sainsbury reported growth in like-for-like sales but Tesco showed a dip in profits in the first half of the year.
Also in the U.K., FirstGroup's stock dropped nearly 20 percent on Wednesday after a $9 billion (5.5 billion pounds) deal for the West Coast rail line franchise was scrapped by the government, which cited flaws in figures provided by the transport department.