Europe Stocks Fall After Merkel, Sarkozy Meet

German Bund future FGBLc1 opened 42 ticks higher at 133.53, after rising as high as 133.79 in after hours trading.

French President Nicolas Sarkozy and Chancellor Angela Merkel on Tuesday vowed to stand side by side in defending the euro and laid the groundwork for future fiscal union. .

But they stopped short of increasing the bloc's rescue fund and disappointed investors by declaring that any thoughts of common euro bond issuance would have to wait.

Support for a common bond had been growing as it is increasingly seen as a way to allow highly indebted euro zone countries to regain access to commercial markets while providing investors a safeguard through joint liability.

"Predictably, Tuesday's meeting between Angela Merkel and Sarkozy offered a statement of intent and floated some generic ideas, rather than offering concrete details on the next steps of how Europe's crisis will be resolved in the immediate future," Societe Generale said in a research note.

Italian 10-year government debt yields would come in focus after falling below 5 percent for the first time in five weeks in the previous session as the European Central Bank continued to buy bonds from those countries.

Analysts have said that the ECB needs to maintain consistent and steady purchases of those bonds to keep funding costs at affordable levels.

Carlsberg A/S, the Nordic region’s largest brewer, plunged 14 percent after reducing its full-year outlook. Deutsche Boerse AG (DB1) and London Stock Exchange Group Plc (LSE) lost more than 3 percent amid plans for a financial-transaction tax.

The benchmark Stoxx Europe 600 Index declined 0.3 percent to 236.79 at 9:08 a.m. in London as more than three stocks dropped for every two that climbed. The MSCI Asia Pacific Index gained 0.2 percent and Standard & Poor’s 500 Index futures rose 0.1 percent.

“The Sarkozy-Merkel meeting was the major event yesterday and anyone expecting a rabbit to be magically pulled from one of their hats would have been disappointed,” Jim Reid, a global strategist at Deutsche Bank AG in London, wrote in a report today. “Whilst markets will ponder the potential effects on market liquidity and the broader economy arising from the financial-transaction tax, it was the broader tax agreement that was unexpected.