European stock markets close lower

European stock markets closed lower yesterday, tipping to the downside as concerns over a deepening eurozone debt crisis offset largely positive US economic data.

Dealers said news that both Spain and Portugal are struggling to meet key deficit targets needed to stabilise their public finances stoked fears that the debt crisis which claimed Greece and Ireland last year is far from over.

Late in the day, Ireland announced that its stricken banks needed another 24 billion euros to cover losses, taking very nearly all the money set aside for them under its EU-IMF bailout terms.

Another rise in eurozone inflation – to 2.6 per cent in March from 2.4 per cent in February – appeared to make a European Central Bank interest rate hike a certainty at its meeting next week.

The ECB has kept rates at a record low one per cent since mid-2008 to help get the economy through the global financial crisis but inflation now well above its 2.0 per cent target requires action.

In London, the FTSE 100 index of leading shares closed down 0.67 per cent at 5,908.76 points. In Paris, the CAC 40 fell 0.88 per cent at 3,989.18 points and in Frankfurt the DAX dropped 0.23 per cent to 7,041.31 points.

Other European markets showed a similar range of losses.

“The re-emergence of the eurozone debt crisis got us off to a shaky start,” said Simon Denham at Capital Spreads.

The first three months of 2011 was a quarter many traders “would rather forget”, he said, noting Middle East unrest driving oil prices sharply higher just before the disastrous Japan earthquake triggered a “frantic sell-off” at the beginning of March.

“So far, 2011 has hardly been short of events that have affected the financial markets and you get the feeling that there’s more to come around the corner,” he added.

In New York, stocks were trading in a narrow range, supported by a fall in new jobless claims which provided encouragement ahead of today’s key government unemployment report.

At the same time, investors were keeping an eye on developments in Europe, focussing on Ireland and the new problems in Spain and Portugal.

“The US equity markets are under some pressure in early action as European stocks are being bogged down ahead of results from Ireland’s banking sector stress tests,” Charles Schwab analysts said in a note.

The blue-chip Dow Jones Industrial Average was down 0.09 per cent and the tech-heavy Nasdaq Composite dropped 0.14 per cent at around 1645 GMT.

In Asian trade earlier yesterday, markets were mostly firmer, building on overnight gains on Wall Street despite lingering caution over Japan’s ongoing nuclear crisis.

Tokyo gained 0.48 per cent as exporters continued to benefit from a weaker yen, Hong Kong added 0.32 per cent but Shanghai fell 0.94 per cent. Sydney rose 0.33 per cent.