Stock markets slipped on Wednesday as investors weighed signs of recession in Europe's third largest economy and fears that talks on avoiding a Greek debt default remained unsolved.
Stock indexes in the U.S., Germany, France and elsewhere were each down by over 0.5 percent in mid-afternoon trade in Europe, as fresh euro-gloom overshadowed a rally in Asia, where technology shares rose on stellar earnings from Apple Inc.
France's CAC-40 index was down 0.8 percent at 3,296 and Germany's DAX was 0.6 percent lower at 6,378, while Britain's FTSE 100 index shed 0.7 percent at 5,709.
On Wall Street, the Dow lost 0.6 percent to 12,595 while the S&P 500 shed 0.5 percent to 1,308.
Stocks were hurt by data showing Britain's economy shrank by 0.2 percent in the last quarter of 2011, a worse-than-expected result that raises recession fears in the country.
Although the closely watched Ifo index of German business optimism rose for a third month, analysts said the wider region was still in trouble.
That was apparent in Portugal, one of the countries most in danger of following Greece into default on its debt, which saw its bond yields rise to a record high. That suggests increased investor fears.
The market tumult was underlined by high profile financier and philanthropist George Soros, who warned an audience at the World Economic Forum in Davos, Switzerland that Europe's “half measures” were insufficient to bring troubled economies in Italy and Spain back to growth.
Soros said Germany's strict anti-inflationary viewpoint was placing unrealistic demands on Europe's weak economies and exacerbating political tension within the EU.
Ireland, which has been absent from debt markets since it was bailed out by the EU and IMF in 2010, will get a sense of what investors think of its recovery when it taps bond markets later in the day for the first time in 16 months.
As throughout the two-year debt crisis, sentiment remains closely linked to developments in Greece.
The country's key bondholders met for a closed-door meeting in Paris to discuss how — and whether — to continue talks on a crucial bond swap.
The steering committee of the Institute of International Finance represents private sector investors that hold a large part of Greece's debt and are being asked to swap their exisiting bonds with new ones of a reduced value, longer maturity and lower interest rate. Greece needs the deal if it is to avoid default this spring.
The difficulty of the talks was acknowledged by German Chancellor Angela Merkel, who will deliver a keynote speech at the Davos forum later Wednesday.
“Despite all the efforts by the Greeks as well as the international community, we have not yet succeeded in stabilizing the situation,” Merkel said in an interview with major European newspapers published Wednesday.
Investors will later focus on the Federal Reserve's latest policy statement and a press conference by its chairman, Ben Bernanke.
The Fed will offer details about how long it plans to keep interest rates very low and release an economic forecast.
Asian stocks posted solid gains earlier. The Nikkei 225 index in Tokyo rose 1.1 percent to close at 8,883.69. South Korea's Kospi gained 0.1 percent to 1,952.23 and Australia's S&P/ASX 200 added 1.1 percent to 4,271.30. Markets in Hong Kong, mainland China and Taiwan remained closed for Chinese New Year.
Japan's powerhouse export sector got a lift from a moderation in the yen's strength even as the country reported its first annual trade deficit since 1980. A strong yen, which hit multiple historic highs last year against the dollar, shrinks the value of overseas earnings when repatriated and makes Japanese products less competitive.
Technology stocks were elevated after Apple Inc. reported earnings that sailed past analyst estimates. Apple said late Tuesday said it sold 37 million iPhones in the last three months of 2011, vastly exceeding estimates and propelling the company to record quarterly results.
The upbeat sentiment was tempered, however, by weaker results by Swedish wireless equipment maker LM Ericsson, whose shares plunged 13 percent after it said profits fell by two-thirds.
Benchmark oil for March delivery rose 8 cents to $99.03 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 63 cents to end at $98.95 per barrel on the Nymex on Tuesday.
In currency trading, the euro rose to $1.3031 from $1.3021 late Tuesday in New York. The dollar rose to 77.98 yen from 77.73 yen.