Mark Lennihan, Associated Press
LONDON — The relief generated by the resignation of Egypt's president Hosni Mubarak last week has proved short-lived, with stocks in Europe and the U.S. failing to make headway Monday. The euro was undermined by renewed concerns over Europe's debt crisis as finance ministers gather in Brussels.
Investors were keeping a close watch on the meeting amid signs that big differences of opinion are beginning to reemerge, not least between the two bailed out countries and Germany.
Greece is thought to be concerned at the level of privatization that the International Monetary Fund and the EU want in return for its bailout loans. Meanwhile Ireland's main opposition party Fine Gael party is indicating that it wants to renegotiate the terms of its IMF-EU bailout should the party emerge — as the polls indicate — as the biggest in the general election in less than two weeks time.
Additionally, Italy is seemingly balking at proposals for annual deficit reduction targets across the eurozone.
Unsurprisingly, given this backdrop, the euro has fallen fairly sharply. By mid afternoon London time, the euro was 0.6 percent lower at $1.3474.
"The single European currency fell sharply over signs that at the start of a two-day meeting among the region's finance ministers, divisions remain deeper-seated than many onlookers had convinced themselves," said Andrew Wilkinson, senior market analyst at Interactive Brokers.
The flare-up in concerns is also evident in the big ramp up in Portugal's borrowing costs in the markets and the recent drift in the value of the euro. That suggests that the "comprehensive solution" promised by EU leaders will need to be outlined soon.
The euro was also been undermined Monday by the increase in uncertainties over who will replace the European Central Bank's president Jean-Claude Trichet later this year, following the decision by Germany's Axel Weber to quit his post as Bundesbank head and not run for the ECB presidency.
The main reason behind Weber's withdrawal is thought to have been his opposition to the European Central Bank buying up bonds of the more indebted countries in Europe — which turned to be a minority view on the bank's governing council.
"The euro is likely to remain pressured near-term by the increase in uncertainties about who will replace Trichet at the helm of the ECB in October and by ongoing concerns about peripheral debt," said Jane Foley, senior currency strategist at Rabobank International.
Developments in stock markets were far less dramatic.
In Europe, the FTSE 100 index of leading British shares closed down a little under 3 points at 6,060.09 while Germany's DAX rose 0.3 percent, at 7,396.63. The CAC-40 in Paris ended 0.1 percent lower at 4,096.62.
In the U.S., the Dow Jones industrial average was down 0.2 percent at 12,220 around midday New York time while the broader Standard & Poor's 500 index was flat at 1,327.
After a big advance over recent weeks, which has sent the main U.S. indexes to their highest levels since June 2008, analysts said Monday's flat performance was unsurprising, especially as the economic newsflow is light.
Tuesday is expected to be more eventful, with a raft of economic growth figures out of Europe and the latest estimate of inflation in Britain likely to dominate sentiment.
"Despite a quiet day today, the last couple of weeks have shown that investors still have an appetite for risk, so it would take a big surprise from either of these numbers to knock the current positive bias from the broader stock market," said Anthony Grech, head of research at IG Index.
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