STARK warnings about the economic strength of Greece, Germany and Hungary fuelled fears of a European recession and spooked traders today.
The FTSE 100 Index was 25.9 points lower at 5670.8 as it surrendered some of yesterday’s gains despite another round of upbeat retail trading updates for the key Christmas period.
Gloom over Europe’s finances gathered after the Federal Statistics Office in Germany said the eurozone’s largest economy is likely to have shrunk by 0.25% in the final quarter of 2011.
Meanwhile, Greece’s development minister said his debt-crippled country will fail to hit crucial budget deficit reduction targets for 2011.
The European Commission warned Hungary had taken “no effective action” in containing its deficit, prompting fears it will need a bailout from the EU and IMF.
And there were fresh rumours that France could suffer a credit ratings downgrade from Standard & Poor’s or Moody’s just days after the other big agency, Fitch, ruled out such a move.
Meanwhile, traders are nervously looking ahead to a series of bond auctions in Germany, Spain and Italy, which will act as a barometer for investor confidence in the nations’ finances.
Germany’s Dax and France’s Cac-40 were down 0.2% and the Dow Jones Industrial Average in the US was 0.3% lower as the London market closed.
The pound was down against the dollar at 1.53 after the greenback was seen as a safe haven. Sterling was also down against the euro at 1.21.
