European stocks retreat, euro advances

European equities retreated Tuesday as investors waited to see if US Federal Reserve chief Ben Bernanke would this week outline steps to boost the world's biggest economy, dealers said.

Meanwhile the euro picked up as news that Mario Draghi would not attend the annual summit of central bank chiefs stoked speculation of a new ECB programme of buying bonds of indebted eurozone states is near.

London's FTSE 100 closed down 0.02 percent to 5,775.71 points, while Frankfurt's DAX 30 dropped 0.64 percent to 7,002.68 points and in Paris the CAC 40 fell 0.90 percent to 3,431.55 points.

Spanish shares lost 0.88 percent and Italian stocks slipped 0.13 percent.

Sentiment in Madrid was hampered by news that Spain's economy shrank by 0.4 percent in the second quarter of 2012, extending the nation's painful recession, and the Catalonia region requesting a five-billion-euro bailout from the central government.

In foreign exchange deals, the European single currency increased to $1.2561, compared with $1.2497 late in New York on Monday.

The dollar slipped against the yen, buying 78.50 yen against 78.74 yen late on Monday.

Investors were waiting to see what central bankers say about stimulus measures when they meet in Jackson Hole, Wyoming, with US Federal Reserve Chairman Ben Bernanke set for a key address on Friday.

"The almost absolute certainty displayed in recent price action that the Fed would ease at Jackson Hole this weekend seems to have petered out, with the major European indices pulling back further from their recent highs and entering a consolidative mode," said CMC Markets Senior Market Strategist Brenda Kelly.

Many traders had also been hoping for possible hints about the European Central Bank's plans for a new programme to buy bonds of indebted eurozone states, but the ECB said Tuesday that Mario Draghi will not attend.

That announcement prompted some euro demand, according to analysts at Barclays bank, with the reference to a heavy workload leading some some market players to believe some sort of ECB action may be imminent.

Financial markets are speculating that Draghi will unveil the details of the new programme at the ECB's next policy meeting on September 6.

US stocks treaded water, with the Dow Jones Industrial Average slipping 0.05 percent to 13,118.67 points in midday trading.

The broad-based S&P 500 dipped 0.01 percent to 1,410.27 points, while the tech-rich Nasdaq added 0.03 percent to 3,074.13 points.

Asian shares were mixed Tuesday amid stubborn fears about the eurozone debt crisis and a slowdown in China.

Shanghai jumped 0.85 percent and Sydney gained 0.36 percent, while Hong Kong edged up 0.07 percent.

But Tokyo fell 0.57 percent after the Japanese government cut its view of the world's third largest economy in August for the first time in 10 months.

"While the lack of confidence in the macroeconomic outlook stressed by the recent cut of the forecast by Japan highlights the fact that the global growth remains a real concern, a rather quiet economic calendar keeps the debt crisis in focus of investors," said Gekko Global Markets trader Anita Paluch.

"Markets are trading lower, but the landscape does not look so terrible as investors are adopting this wait-and-see attitude before Bernanke's speech."

-- with Dow Jones Newswires --

Source: http://news.yahoo.com/european-stock-markets-mostly-drop-003356960.html

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