Europe Markets

European Shares End Lower on 'Fiscal Cliff' Worries


European shares closed the last full trading session of 2012 lower as wavering expectations of a deal to prevent the U.S. stumbling over its "fiscal cliff" left overbought indexes vulnerable to profit taking.

The FTSE Eurofirst 300 Index closed in negative territory. Amid major uncertainty over U.S. fiscal talks, traders remained largely on the sidelines, with thin volumes across most markets. Indexes had initially opened higher as hopes for monetary stimulus in Japan spurred investors on.

On Friday, President Barack Obama will meet Congressional Leaders at the White House at 3 p.m. Washington time for talks to resolve the "fiscal cliff", a series of spending cuts and tax increases that are due to come into effect on January 1.

"With U.S. President Barack Obama having reportedly cut his holiday short and returning to Washington to meet U.S. leaders for last ditch talks, there is growing optimism that a deal can be knocked before the deadline," Chris Watson. chief market strategist at IG Markets said in a morning note.

A final estimate of third-quarter GDP was released on Friday in France. The statistics agency INSEE said the economy grew by 0.1 percent, a drop from an initial reading of 0.2 percent. French consumer spending data was also released showing a 0.2 percent fall in November from the year before.

At an auction on Friday Italy's treasury sold 5.87 billion euros of bonds which hit expectations, although the yield for 10-year benchmark paper rose to the highest seen since October.

Spanish retail sales figures released on Friday fell by 7.8 percent in November on a year-over-year basis, marking 29 months of straight declines in the recession-hit country.

In stocks news the U.K.'s FTSE 100 Index showed the biggest gains in morning trading, near 2012 highs. Manoj Ladwa, head of trading at TJ Markets told CNBC that it was possible for the FTSE to still hit the 6000 point level before the end of the year.

Lonmin shares were 2 percent lower after chief executive Ian Farmer said he was stepping down due to serious illness. Simon Scott will continue as acting CEO.

The autos sector showed the biggest gains in morning trading on a sector per sector basis before turning negative. A lawsuit brought by 26 hedge funds accusing of cornering the market was thrown out on Friday; shares were 5.39 percent higher.

Car makers such as Renault and Ford have that they are expanding production in Spain despite its weak economy. Shares in both firms traded higher initially on Friday.

Stock in Spain's Bankia traded nearly 30 percent lower as recapitalization issues still surround the struggling bank. Reports emerged on Thursday that that losses on bad loans at the bank were even worse than expected.