- Investors weigh US budget deal, Fed stimulus
- US mortgage applications increase
- German inflation rises
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European stocks ended the session lower as investors weighed a US budget deal ahead of the Federal Reserve's policy meeting next week.
Chief Congressional negotiators Senator Patty Murray and Representative Paul Ryan last night worked out a deal that would set spending at about $1.01trn in the current fiscal year, up from the $967bn required in a 2011 budget plan. The budget still needs to be passed in both the Senate and the House.
If passed, it will end three years of impasse and fiscal instability in Washington that culminated in October with a partial government shutdown.
The budget comes before a non-binding Friday deadline and more than a month before the January 15th date when existing funds to run many federal programmes expire.
"The agreement will cut the estimated drag from fiscal policy in calendar year 2014 roughly in half, to about 0.25% from 0.50% previously and, if passed, would lead to a modest direct boost to GDP and some upside risk to our forecast of 2.4% for real GDP growth in 2014," according to Barclays Research.
"However, the deal does not provide for an increase in the debt ceiling past February 7th, nor does it address longer-term structural budget issues."
Some analysts saw the agreement to support the case for a scaling back of stimulus at the central bank's policy meeting on December 17th-18th.
According to a recent survey by Bloomberg, 12 out of 35 economists believe that the Fed will begin to taper next week, nine said a withdrawal will start in January while the remaining 14 don't expect a scaling back of stimulus until March.
US mortgage applications, German inflation
US mortgage applications rose by 1% in the week to December 6th, compared to the previous week's decline of 12.8%.
Germany's inflation rose by 1.3% in November, the same rate of growth as the previous month and in line with analysts' expectations.
Elsewhere in the Eurozone, European Central Bank Governing Council member Ewald Nowotny said there are limits as to what monetary policy can still do to stimulate demand for credit to fund investments.
"Credit availability is not a problem now but what we see is that demand is very low," Nowotny, Governor of the Austrian Central Bank, told a news conference on Austrian bank stability today.
"The possibilities of monetary policy are more or less limited. It is the demand side that decides investments."
Stagecoach Group advanced as the transport operator said six-month adjusted earnings increased to 14.6p per share, beating the forecast of 13.7p.
Bpost SA declined when trading in the stock resumed after being suspended late yesterday. CVC Capital Partners Ltd.'s Post Invest Europe SARL sold a 19.7% stake in Belgium's state-controlled postal service for €580m.
The Royal Bank of Scotland slumped after confirming Finance Director Nathan Bostock will resign - less than 10 weeks after joining the board - to join Santander UK.
Imagination Technologies dropped after posting half-year sales that missed analysts' estimates.
EADS edged higher after saying it will target a dividend payout ratio of 30% to 40%.
Natxis gained after Exane BNP Paribas SA raised its rating on the stock to 'outperform' from 'neutral'
Mediolanum retreated as Fininvest SpA, the investment company of Silvio Berlusconi's family, raised €253m from the sale of a 5.61% stake in the financial-services company.
The euro rose 0.26% to $1.3797.
Brent crude futures fell $0.229 to $109.130 per barrel, according to the ICE.