European stocks closed lower yesterday after Opec dashed hopes of an oil output hike which would have eased inflation pressures, while the euro slipped on persistent Greek debt concerns.
Investors were hoping Opec would increase output so as to cool prices and thereby help boost a slowing global economy, but the oil cartel opted for no change in the face of sharp divisions at a tense Vienna meeting.
Oil prices shot higher in response, undercutting stocks with sentiment already negative after US Federal Reserve chairman Ben Bernanke warned on Tuesday of a “loss of momentum” in an already tepid US jobs market.
“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established,” Mr Bernanke said. A fall in German industrial orders and trade data for April added to the European gloom.
In London, the benchmark FTSE 100 index of top shares closed down 0.95 per cent at 5,808.89 points. In Frankfurt, the DAX fell 0.61 per cent to 7,060.23 points and in Paris the CAC 40 dropped 0.88 per cent to 3,837.98 points.
Other European markets were similarly in the red. In Paris, Frederic Rozier at Meeschaert Gestion Privee said that while Mr Bernanke’s assessment was no surprise, there was “disappointment that he did not suggest that the Fed’s ultra-loose monetary policy will continue”.
“He made no effect to put the best gloss on the position and the market did not like that,” Mr Rozier added.
Another dealer said Germany’s latest statement on the Greek debt crisis had also hit sentiment, “undercutting the consensus that appeared to be emerging”.
The euro initially got a boost as Mr Bernanke’s downbeat comments dented sentiment on the dollar but a warning from Germany that private sector holders of Greek bonds would have to carry some of the burden of a mooted second bailout plan for Athens sparked fresh fears over the eurozone debt crisis.
The top international credit rating agencies have said they will mark down Greece as in default if bond holders are hit in this way, risking a new crisis in the whole financial sector and perhaps putting the eurozone in jeopardy.
The weak German data added to the pressure although analysts said the figures suggested Europe’s powerhouse economy was still doing very well, if at a slightly slower pace.