European stocks slip on Greek news
The Madrid market sank 0.90 percent and Milan dropped 0.72 percent in value.
LONDON (AFP) - Europe s stock markets slid Thursday after the European Central Bank moved to restrict Greek banks access to a key source of cash, sparking fears of a potential default, analysts said.
Investor sentiment won only a partial boost after the European Union hiked this year s growth forecast for the struggling eurozone but confirmed that deflation would take hold.
In late morning deals, London s FTSE 100 index dipped 0.48 percent to 6,827.20 points before the latest monetary policy decision from the Bank of England, which is expected to hold its key interest rate at a record-low 0.50 percent.
Frankfurt s DAX 30 shed 0.25 percent to 10,884 points and in Paris the CAC 40 reversed 0.60 percent to 4,667.90 compared with Wednesday s close.
Athens stocks however plunged more than nine percent in early trade before recovering some of its losses to stand at 807.02 points, down 4.84 percent from Wednesday.
The Madrid market sank 0.90 percent and Milan dropped 0.72 percent in value.
In foreign exchange activity, the euro rose to $1.1418 from $1.1334 late in New York on Wednesday.
"The decision by the ECB to no longer accept Greek bonds as collateral may be aimed at piling the pressure on Greece to request an extension of its current bailout beyond February 28, but it is has also raised the risk that Greece could be forced into a default," said Rabobank analyst Jane Foley.
"In reflection of this risk there have been some movements higher in bond yields in Italy, Spain and Portugal ... and euro/dollar is being pressured."
In an announcement late Wednesday, the ECB said it would no longer allow Greek banks to use government debt as collateral for loans.
Greek debt has a junk credit rating and, under ECB rules, should not qualify as collateral.
But Greece had been granted a waiver because of the country s dire economic situation. The ECB s decision to take away that measure is seen as adding extra pressure to Greece s new government to strike a deal on the massive debts stemming from its international bailout.
Greece s new anti-austerity government came to power on a promise to renegotiate the country s 240-billion-euro EU-IMF bailout and erase over half the country s debt.
"The European Central Bank said it would not accept Greek bonds as collateral -- a robust early response to Athens efforts to renegotiate bailout terms with creditors," added ETX Capital analyst Daniel Sugarman.
European equities had wobbled Wednesday as traders tracked Greece s efforts to renegotiate its debts.
Concerns about Greece s plans also rattled Asian markets on Thursday, while Shanghai and Hong Kong shares ended down despite China cutting its funds reserve requirement for banks.
Tokyo stocks tumbled 0.98 percent despite Sony surging 12 percent to a five-year high on an improved earnings outlook.
Sydney rose 0.58 percent, while Seoul lost 0.51 percent.
Shanghai, which surged 2.45 percent in early trade, ended 1.18 percent lower, but Hong Kong added 0.35 percent in value.
