World stocks laid low by a call for new elections in Greece and prolonged agony in the eurozone wavered in nervous trade yesterday as fears of a Greek exit from the euro lingered.
Investors were encouraged by a 1.1 per cent jump in US industrial production in April over March and a surge in new home construction that beat analyst expectations, but concerns over the eurozone still weighed on sentiment.
The euro hit a four-month low and borrowing rates for eurozone countries signalled alarm, with the spread – the difference in interest rates – between 10-year Spanish and German bonds hitting a record high.
At the close, London’s benchmark FTSE 100 index of top companies lost 0.60 per cent to 5,405.25 points and in Frankfurt, the DAX 30 dropped 0.26 per cent to 6,384.26 points.
But in Paris the CAC 40 gained 0.31 per cent to 3,048.67 points after a largely successful bond auction by the French government, the first since Hollande took office.
Madrid sank 1.33 per cent in volatile trade and Milan slipped 0.21 per cent.
US stocks were higher, buoyed by figures showing a rebound in US industrial production and new home construction in April.
At around 1600 GMT, the Dow Jones Industrial Average added 0.32 per cent, the S&P 500 rose 0.29 per cent, while the tech-heavy Nasdaq was up 0.15 per cent.
The first meeting on Tuesday between German leader Angela Merkel and new French President Francois Hollande did little to soothe nerves, with Berlin again insisting yesterday that Athens cannot change the terms of its massive bailout.
“This is an aid programme that was prepared down to the last detail, we cannot renegotiate it,” German Finance Minister Wolfgang Schaeuble told Deutschlandfunk radio.
The European Union backed his view, with the head of the European Commission, Jose Manuel Barroso, warning there was “no way” of changing the terms of the rescue package.
In Britain, the Bank of England said that challenges in eurozone were “the single biggest threat to the recovery”.
The failure of euro-zone nations to address their problems “could have severe implications for the UK economy,” the Bank of England said as it slashed its growth forecast for Britain this year to just under 1.0 per cent.
The International Monetary Fund meanwhile heaped praise on radical reforms enacted in debt-burdened Italy by Prime Minister Mario Monti.