Markets Recover Despite Lack Of Euro Breakthrough

LONDON — European stocks recovered Thursday from heavy losses the previous day, while the euro touched a 22-month low after the continent's leaders failed to reach a breakthrough in their crisis resolution efforts.

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Stocks took a pummeling the previous session as expectations dissipated that the European Union leaders in Brussels would agree any meaningful measures to boost economic growth or stabilize financial markets.

"Well for once a European summit did not disappoint; they promised nothing and that is exactly what we got," said Gary Jenkins, managing director of Swordfish Research. "Is it just me or does that suggest a frightening lack of urgency?"

Though there were discussions about such things as jointly-issued eurobonds and the prospect of some form of cross-border deposit insurance scheme, nothing of any substance was announced.

Herman Van Rompuy said more work needs to be done in the run-up to the next EU summit on June 28-29.

The problem with that timeframe is that Europe, and the 17-country eurozone in particular, is facing another timetable that could scupper their plans.

The Greek general election on June 17 could see anti-bailout political parties gain power, which would raise the likelihood of the country leaving the euro. That likelihood has been growing since early May, when political parties opposed to the terms of the country's financial rescue deprived pro-austerity parties of a majority at the polls.

"With last night's summit done, we now start the run-up to Greek elections in mid-June, possibly the single most decisive event since the crisis began," said Chris Beauchamp, market analyst at IG Index.

For now, investors in stock markets are buying up some beaten-down stocks, particularly in Europe despite more grim economic news, including mounting signs of a deep recession.

The monthly purchasing managers' index from Markit, a gauge of business activity, fell to 45.9 in May from 46.7 in April. The fall was bigger than the expected decline to 46.5. Anything below 50 indicates a contraction.

Germany's DAX was up 0.5 percent at 6,316 in spite of the Markit figures and a worse-than-expected business survey from the well-regarded Ifo Institute.

The CAC-40 in France rose 0.8 percent to 3,028 while the FTSE 100 index of leading British shares was 1.3 percent higher at 5,333 despite figures showing that the U.K. economy contracted by a greater-than-expected 0.3 percent in the first quarter.

However, with Europe's debt crisis still raging and a Greek exit from the euro openly discussed, the euro remained under pressure, dropping to a fresh 22-month low of $1.2515 at one stage before recovering slightly to $1.2578.

U.S. stocks underperformed their European counterparts as they had suffered milder losses the day before _ the Dow Jones industrial average was flat at 12,495 while the broader S&P 500 index rose 0.1 percent at 1,320.

Earlier in Asia, Japan's benchmark Nikkei 225 closed marginally higher at 8,563.38, having earlier in the day skimmed 8,496.61 _ its first time below 8,500 in more than four months.

Hong Kong's Hang Seng fell 0.6 percent to 18,666.40. South Korea's Kospi swung between gains and losses before ending up 0.3 percent at 1,814.47.

Oil prices recovered alongside equities after falling to ten-month lows amid the prevailing gloom in world markets _ benchmark oil for July delivery was up $1.05 to $90.95 a barrel in electronic trading on the New York Mercantile Exchange.

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Pamela Sampson in Bangkok contributed to this report.