European stocks slip, euro pressured by Greece

By Emelia Sithole-Matarise

LONDON (BestGrowthStock) – European shares bucked a rise in world stocks on Wednesday as data showed the euro zone economy stalled in the last quarter of 2009 while festering worries about Greece’s debt problems kept the euro weak.

The 16-member single currency bloc posted zero growth in its gross domestic product quarter-on-quarter in the last months of 2009, rather than a previously reported 0.1 percent expansion, the European statistics office said, highlighting the fragility of economic recovery in the region.

Globally, the picture is more upbeat after a recent run of strong U.S. data and signs of improving growth prospects in Asia that helped push world stocks close to 18-month peaks.

The euro zone data put a further dampener on European shares which were already soft on a pullback in mining and banking stocks and renewed concerns over Greece’s finances.

“The rebound in the United States is well supported by a strong economic recovery, but it’s more complicated in Europe and the recent gains remain fragile,” said Christian Jimenez, fund manager and president of Diamant Bleu Gestion in Paris.

“The weaker euro might have had some positive effects, but it’s definitively not favorable to investments and risk taking. I remain bullish on stocks, but vigilant and ready to get out if the wind changes direction.”

The FTSEurofirst 300 index of top European shares shed 0.2 percent after hitting an 18-month high for a second session in a row on Tuesday.

The European benchmark is up 5.3 percent so far this year.

Word stocks as measured by MSCI edged up 0.1 percent, near their highest since early October 2008.

FISCAL WORRIES

The euro fell (Read more about the trembling euro. ) to a one-week low on worries about Greece’s ability to resolve its debt crisis. The common currency was 0.3 percent softer at $1.3354 by 1055 GMT, within sight of an 11-month trough of $1.3265 hit late in March.

“Renewed uncertainty over Greece is hurting an already jittery euro,” said Stuart Bennett, senior FX strategist at Credit Agricole. “Even though the market is already heavily short of euro, there is still downside risk.”

The single currency came under fresh pressure after the Easter break on reports that Greece wanted to amend an EU-IMF safety net deal set up late last month to help pay for its debts in an emergency.

Although Greece denied the reports, the market paid no heed and continued to bet on Athens having troubles cutting its debt burden, even as its borrowing costs mount.

Investors demanded a yield around seven percent for buying 10-year Greek bonds. That is almost 100 basis points above levels seen last week, and nearly 400 basis points above German benchmark 10-year Bunds.

The Greek/German bond yield gap widened to as much as 408 bps on Tuesday, its widest since Greece joined the euro in 2001.

Euro-denominated gold prices retreated from a record high of 851.86 euros an ounce hit earlier as a strong dollar offset buying linked to fear-driven diversification into hard assets like bullion.

Oil retreated from 18-month highs around $87 while copper prices pulled back from 20-month peaks as traders worried the metal’s recent rally may have been overdone. U.S. light crude futures for May were 0.5 percent lower at $86.37 by 1050 GMT, and down from Tuesday’s intraday peak of $87.09, the highest since October 2008.

Stock Market Research

(Additional reporting by Neal Armstrong and Blaise Robinson; Editing by Ruth Pitchford)

European stocks slip, euro pressured by Greece