Global markets slip ahead of EU debt summit

Global stock markets were lower in cautious trade on Tuesday as investors waited in hope for a second EU summit to produce a long-awaited plan to solve the eurozone debt crisis. Dealers said there was little reason to trade aggressively given the often conflicting news leads as officials try to thrash out the details of what European leaders say should be a comprehensive solution to the problem. They said that, however, looks unlikely, given the competing interests involved and the issues at stake -- no less, for some, than the future of the whole eurozone project and the European Union. In mid-afternoon trade, London's benchmark FTSE 100 index was down 0.96 percent, giving up early modest gains. Frankfurt's DAX 30 lost 0.91 percent and Paris fell 1.31 percent. In the foreign exchange market, the European single currency was lower at $1.3891, down from $1.3930 in New York late Monday. In New York, the blue-chip Dow Jones Industrial Average was down 1.08 percent in opening trade, with the tech-heavy Nasdaq Composite down 1.36 percent. Dealers said Europe's leaders appeared to be still struggling to reach agreement with banks over reducing Greece's debt burden and protecting Italy from any fallout. Jim Cunningham at Schaeffer's Investment Research said US investors were also "responding to lackluster earnings guidance from the likes of tech giant Texas Instruments and entertainment guru Netflix." EU officials are making final preparations for a make-or-break summit in Brussels on Wednesday against a backdrop of increasing uncertainty over Italy's immediate future and wrangling over the terms of an overall debt package. "The EU will reveal, in all its full glory, the plan to resolve southern Europe's debt crisis," said Mark Deans, dealing manager at London-based currency specialists MoneyCorp. "Until then, those with cash to invest are inclined to bide their time," he added. "If EU leaders get it right, that cash will go into equities, commodities and their related currencies. If they get it wrong the money will go into ... safe-havens." Attention remains fixed on Europe, where Italy and Spain appear the next most likely victims of a crisis that many fear could spark a credit crunch and possibly another global meltdown if the problem is not remedied. European leaders, who held talks on Sunday, appeared to make progress in their efforts to fix the continent's economic problems and put the final touches to a deal on Wednesday. They announced few details at the weekend but promised instead to reveal all after those top-level talks. The eurozone wants to beef up its 440-billion-euro ($610 billion) rescue fund, the European Financial Stability Facility, to convince markets it has the means to protect highly indebted nations. Leaders also want to agree on a huge write-down on the debt of stricken Greece and make sure banks have enough reserves to withstand these losses. Despite the apparent progress, there are concerns they might not be able to do enough because of their many differences. "Tomorrow is the first major hurdle for the markets in seeing credible and concrete plans from EU policymakers," said VTB Capital economist Neil MacKinnon. "There is the risk that EU plans are considered only sufficient to buy time, rather than being the masterplan which fully resolves the crisis." Investors want to see the recent assurances turned into a definitive and binding agreement. Investors set aside a barrage of European company results, from the likes of British oil major BP, Germany's top lender Deutsche Bank, Dutch telecoms operator KPN and Swiss banking giant UBS. "Earnings are being pushed to the back of the mind as we approach what will be a key Eurozone decision," noted Owen Ireland, broker at Valbury Capital. He added: "Investors will be biting their nails in anticipation of what, for the good of global economic health, needs to be a spectacularly well-considered set of measures." In Asian trade earlier, Tokyo slipped 0.92 percent and Sydney fell 0.64 percent. Hong Kong jumped 1.05 percent and Shanghai rose 1.66 percent after Chinese data showing a pick up in manufacturing activity.