LONDON (AP) — Stock markets traded within fairly narrow ranges Tuesday after big declines the previous day as investors awaited the latest assessment of the U.S. economy from the U.S. Federal Reserve.
Though the Fed is expected to keep policy unchanged at the conclusion of its meeting later, investors will be interested to assess the tone of its accompanying statement in light of a recent improvement in the U.S. economic newsflow and Europe's debt crisis.
Further signs of stress emerged Tuesday to indicate that Europe's most recent summit agreement to get the euro countries to tighten rules against excessive government spending has only made limited progress in pulling the continent out of its debt crisis.
While figures showed that Europe's banks parked more money at the European Central Bank than they have at any other time this year, Italy's borrowing rates traded at levels not far from those that forced Greece, Ireland and Portugal into seeking financial bailouts.
Investors are nervously awaiting the response of rival agency Standard & Poor's. Last week it warned it could downgrade most of the 17 eurozone economies, including Germany, if the euro deal failed to deliver.
"Markets are now awaiting the result of S&P's post-summit review of the eurozone," said Chris Beauchamp, market analyst at IG Index. "If the agency decides to downgrade any of the big names then life could easily become more exciting."
In Europe, the trading session ended disappointingly and the main indexes in Germany and France ended modestly lower despite being higher for most of the day.
Germany's DAX ended 0.2 percent lower at 5,774.26, while France's CAC-40 fell 0.4 percent to 3,078.72. The FTSE 100 index of leading British shares, however, ended 1.2 percent higher at 5,490.15.
In the U.S., the Dow Jones industrial average was up 0.5 percent at 12,078 while the broader Standard & Poor's 500 index rose 0.4 percent to 1,242.
The advance on Wall Street came despite figures showing that U.S. retail sales rose by a monthly rate of 0.2 percent in November, below market expectations for a 0.6 percent increase. November figures are important because it's the start of the key holiday shopping season.
Tuesday's calmer tone in markets was evident for a while in the performance of the euro, which was trading around the $1.32 mark for much of the day. However, concerns over the ability of last week's deal undermined the currency once again, sending it down to 11-week dollar lows of $1.3055.
"The financial markets are now digesting the details of the EU deal struck last Friday, and it is quickly becoming apparent that the financial markets have once again given it the thumbs down," said Derek Halpenny, an analyst at The Bank of Tokyo-Mitsubishi UFJ.
He added that could mean major funding difficulties in the first half of 2012, when European nations, in particular Italy, have sizable sovereign debts that need to be refinanced.
Earlier in Asia, stocks took a battering following the previous day's retreats in Europe and the U.S.
Japan's Nikkei 225 fell 1.2 percent to close at 8,552.81 while South Korea's Kospi gave up 1.9 percent to 1,864.06 and Hong Kong's Hang Seng lost 0.7 percent to 18,447.17. On mainland China, the benchmark Shanghai Composite Index fell 1.9 percent to 2,248.59, its lowest in closing since March 2009. The Shenzhen Composite Index lost 3 percent to 921.32.
Oil prices recovered some ground ahead of a meeting of the OPEC oil cartel in Vienna, Austria, which is expected to see production levels left unchanged. Benchmark oil for January delivery was up $1.893 to $99.66 per barrel in electronic trading on the New York Mercantile Exchange.
Pamela Sampson in Bangkok contributed.