European stock markets closed lower yesterday in volatile trade, reversing direction several times as investors tried to set better-than-expected US economic data against eurozone debt fears.
Dealers said early news of the massive bill to keep Ireland's stricken banking sector afloat hit sentiment and the euro initially but confidence returned on the view that the worst of the problem was now clear.
They said an unexpected hike to US second quarter growth figures – to 1.7 per cent from 1.6 per cent – and better-than-expected new jobless claims turned the markets around quickly in the afternoon.
However, an about face on Wall Street then prompted a late sell-off to leave most European bourses in negative territory as investors closed books for the end of the third quarter after solid gains in September overall.
In London, the FTSE 100 index of leading shares closed down 0.37 per cent at 5,548.62 points, having been up more than one per cent. In Paris, the CAC 40 index shed 0.59 per cent to 3,715.18 points and in Frankfurt the DAX dropped 0.29 per cent to 6,229.02 points.
The euro was at $1.3590 in late London trade, off afternoon highs of $1.3683 and down from $1.3625 in New York late Wednesday.
The dollar was at 83.54 yen, down from 83.72 yen. Gold, the traditional safehaven investment continued to attract strong support, chalking up yet more record highs to $1,315.95 an ounce.
At the late fixing in London, gold was at $1,307 after $1,307.50 on Wednesday. Bond markets were easier, with the Irish government's announcement clearing the air after record yields on Irish debt earlier in the week.
In New York, the blue-chip Dow Jones Industrial Average was down 0.75 per cent at around 1605 GMT, with the tech-heavy Nasdaq Composite index off 0.85 per cent.
Dealers said the erosion of solid early gains made on the strong data reflected simple profit taking on the last day of the quarter.
Peter Cardillo at Avalon Partners said he believed the reversal was largely due to investment fund action, with September having been 'extraordinarily good' for shares.
Earlier, Ireland said its Anglo Irish Bank rescue could cost more than €34 billion ($ 46 billion) and result in a record public deficit this year, highlighting the problems of weaker eurozone states in fixing their strained public finances.
A Moody's rating downgrade for Spain, just as the government unveiled a stiff austerity budget and after Wednesday's general strike against spending cuts, added to nerves over the underlying stresses in the eurozone.
European Union officials insisted that despite the latest announcements, a rescue fund set up earlier this year to help struggling eurozone states was unlikely to be needed, although it was ready for action if required.