European stocks close lower

Europe's main stock markets closed lower yesterday as an uncertain start on Wall Street after heavy losses provided no lead following mixed US data.

Dealers said sentiment was cautious after New York shed more than two per cent on Wednesday as investors fretted that mounting government debt could result in higher interest rates, dampening hopes for recovery.

They said concerns about General Motors eased somewhat on the announcement of an agreed bankruptcy restructuring with the US government, and on better-than-expected durable goods and new jobless claims data.

At the same time, the improved figures appeared rather to confirm that the downturn was bottoming out than indicate that recovery was in sight, leaving Wall Street marking time and giving no lift to late European trading.

Continued weak US new home sales figures added to the negative tone.

In London, the FTSE 100 index of leading shares finished down 0.65 per cent to 4,387.54 points. Frankfurt's DAX lost 1.36 per cent to 4,932.88 points and in Paris the CAC 40 fell 0.95 per cent to 3,263.70 points.

Dealers said that as governments seek to raise more debt to help keep their economies above water, the return - or yields - on the bonds they want to sell are rising, which risks in turn pushing up wider interest rates.

Investors fear that if interest rates rise, they could choke off any recovery from the deepest slump since the 1930s.

"Europe's markets fell, tracking overnight falls on Wall Street, due to concerns that rising bond yields may handicap an economic recovery," said analyst Joshua Raymond at spread-betting firm City Index.

"Debt has long been a concern within the markets but investors have pushed this to one side, preferring to focus on signs of a recovery in house prices and high street sales.

"Rising bond yields in the US have served as a reality check to the wider market that the management of debt will play a key role in an economic recovery, sending markets lower," Raymond said.

James Hughes of CMC Markets said London trade was quiet, with investors taking their lead mainly from Wednesday's downturn on Wall Street.

In Paris, one dealer said the markets were in consolidation mode after strong gains since early March, with investors waiting to see whether improving economic data will be confirmed with a return to growth soon.

Elsewhere in Europe, Amsterdam was down 1.25 per cent, Brussels lost 1.0 per cent, Madrid dropped 0.79 per cent, Milan shed 0.80 per cent and Swiss stocks fell 1.27 per cent.

In New York yesterday, the Dow Jones Industrial Average of 30 blue-chip stocks posted solid early gains in a technical rebound to Wednesday's losses but it then slipped into negative territory before rising again.

At around 1615 GMT, the DJIA was up 0.17 per cent.

In Asia, Tokyo edged up 0.13 per cent while Sydney fell 1.19 per cent. Hong Kong was closed for a public holiday.