European stock markets wilted yesterday in the face of profit-taking and as Britain announced a tough austerity Budget while Wall Street edged higher on mixed economic data.
In Europe, markets closed lower as investors took profits after following gains recorded in the past several days.
The London FTSE 100 index shed 0.98 per cent to close at 5,246.98 points while in Paris the CAC 40 fell 0.83 per cent to finish at 3,705.32. The Frankfurt the DAX gave up 0.38 per cent and closed at 6,269.04.
Elsewhere there were declines of 0.97 per cent in Milan, 0.52 per cent in Madrid and 0.36 per cent in Amsterdam.
The financial sector was under pressure in Paris after ratings agency Fitch lowered its assessment of BNP Paribas bank from AA to AA-minus, citing the group's exposure to risky businesses and assets.
"The downgrade was surprising," a Paris trader said, notably as there are other banks facing even greater challenges. BNP Paribas fell 1.92 per cent, Natixis lost 1.78 per cent and Société Générale 3.96 per cent.
British banks were mixed after Britain, France and Germany said they had agreed to introduce levies on banks to make them help pay for global recovery.
The British move is aimed at earning the state £2.0 billion a year. Investors had feared a steeper tax that would take in £3.0 billion.
Lloyds Banking Group gained 4.13 per cent while Barclays gave up two per cent.
US stocks posted modest gains, shrugging off a weak report on home sales and renewed concerns that Europe's sovereign debt crisis may disrupt the global economic recovery.
The Dow Jones Industrial Average was up 0.20 per cent to 10,463.64 at mid-day while the tech-rich Nasdaq had risen 0.68 per cent to reach 2,304.63.
"The US equity markets have battled back," Charles Schwab & Company analysts said in a note to clients, following "the damage to sentiment that came from an unexpected drop in existing-home sales and from continued euro-area deficit concerns."
Sales of previously owned homes in the United States fell 2.2 per cent in May after two consecutive rises, the National Association of Realtors said yesterday, despite support from a government tax-incentive programme.
But in more positive news, manufacturing activity in the Richmond, Virginia region showed a smaller-than-expected drop.
Asian stock markets retreated earlier in the day, with traders cashing in on big gains in the previous session after China vowed to make its yuan currency more flexible.
Share prices soared Monday after a weekend announcement from Beijing that it would "strengthen the flexibility" of the yuan exchange rate, raising hopes China was ready to adjust its dollar peg and allow the currency to rise.