European shares pared heavy early losses to close flat after mixed data from Europe and the United States, with investors cautiously awaiting the outcome of a meeting between France's President and Germanys' Chancellor on Europe's debt crisis. After the market closed, France's Nicolas Sarkozy said there was no need to increase the size of the eurozone's bailout fund or create a new "euro bond" to ease the region's problems.
US indices, trading at the time of the news conference, fell on the news, potentially heralding losses when European markets reopen on Wednesday. Sluggish GDP data from core European economies had seen the FTSEurofirst 300 index of top European shares fall as low as 951.03, before closing down 0.09 point at 969.16 points.
Germany, Europe's largest economy, grew 0.1 percent in the second quarter, while eurozone growth slowed to 0.2 percent. "(This indicates) that the impact of the ongoing sovereign debt crisis on confidence and financial austerity measures are increasingly dragging on the European economy," Colin Cieszynski, market analyst at CMC Markets Canada, said.
German truckmaker MAN and automaker BMW fell 3.2 percent and 0.7 percent, respectively, on concerns over the outlook for growth. Austerity measures weighed on Italian utilities such as Snam Rete Gas and electricity grid operator Terna , which traded around four times their 30-day average volume and fell 9.9 percent and 13.6 percent respectively, after Italy increased taxes on the energy sector.
UBS analysts said they expected the tax rise to cut 6 percent off Enel's earnings per share and the extension to network companies, which were not covered by the tax before, to hurt Snam's and Terna's EPS by 13 percent. Gold-related equities like Fresnillo and Randgold, up 3.6 percent and 4.1 percent, were again sought after as a proxy for the precious metal which remains near its all-time high as investors, unconvinced over the global growth outlook, bought into its safe haven qualities.
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