Stocks and euro down

European stock markets closed lower and the euro fell yesterday as concerns over the eurozone debt crisis once again unsettled in­vestors after sharp recent gains.

Dealers said a subdued German government bond sale and continued weakness in the eurozone private sector dented sentiment and encouraged some profit-taking.

Figures showing that the commercial banks deposited record amounts with the European Central Bank added to the unease, suggesting that lenders remain reluctant to lend to each other amid ongoing market tension.

Analysts said the banks appear to want to hold their excess funds at the ECB after borrowing massively under a new three-year facility, rather than risk on-lending the money, as was hoped they would do to boost economic activity.

Spain and Italy came under heavy pressure, with the two countries seen as the next most at risk in the eurozone crisis, made more vulnerable by the lack of growth to help offset their large debt burden.

The Milan market was additionally hit after Unicredit priced its €7.5 billion share offer at a 43 per cent discount to Tuesday’s finish, sending its own and other bank shares down sharply.

In London, the FTSE index of leading companies closed down 0.55 per cent at 5,668.45 points. In Paris, the CAC-40 index lost 1.59 per cent to 3,193.65 points and in Frankfurt the DAX 30 dropped 0.89 per cent to 6,111.55 points.

Milan tumbled 2.04 per cent and Madrid shed 1.72 per cent.

The euro fell to $1.2934 from $1.3051 in New York late yesterday and slipped back under 100 yen, to 99.20 yen.

In New York, the blue-chip Dow Jones Industrial Average was off 0.10 per cent and the tech-dominated Nasdaq Composite fell 0.19 per cent at around 1700 GMT.

In Asian trade earlier yesterday, Tokyo rose on its first day of trading in 2012 as investors took a strong lead from Wall Street overnight.

Tokyo gained 1.92 per cent and Sydney 2.11 per cent.