European markets volatile after Sarkozy-Merkel talks

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European markets volatile after Sarkozy-Merkel talks

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Another volatile day for European shares. Markets closed at their highest level in more than a week on Wednesday after early losses following disappointment from a Franco-German summit.

The gains came as investors focused on strong company earnings – particularly in the US from major retailers Target and Staple.

European markets had slipped in morning trading on Wednesday amid concern that euro zone leaders will fail to contain the bloc’s fiscal crisis.

Investors have been calling for a larger EU rescue fund and a common euro zone bond, which would pool the debts of the 17 single currency members.

French President Nicolas Sarkozy met German Chancellor Angela Merkel in Paris on Tuesday. But both leaders stopped short of proposing such drastic moves.

Sarkozy reiterated his support for “real economic governance” for the euro zone. He said France and Germany wanted all euro zone nations to commit to balanced finances by enshrining the principle in their domestic law.

Merkel and Sarkozy also said they would revive a proposed tax on financial transactions at the next EU summit in September. Such a tax was rejected by European leaders last year.

EU treaties state that fiscal reforms need the agreement of all 27 members. Britain is opposed to the idea of a financial transaction tax, arguing it would drive business away from the City of London to Asia.