European stocks slide in line with Wall Street concerns

European stocks lost ground yesterday as traders kept an anxious eye on a key European meeting on the Greek finance crisis and after a weak start to the day on Wall Street on concerns about a possible Chinese rate hike.

The London FTSE 100 index shed 0.57 per cent to finish at 5,593.35 points while in Paris the CAC 40 lost 0.93 per cent to close at 3,890.91. The Frankfurt the Dax fell 0.70 per cent to 5,903.56.

Elsewhere there were declines of 1.8 per cent in Madrid, 1.31 per cent in Amsterdam, 0.17 per cent on the Swiss Market index and 0.63 per cent in Brussels.

"The markets have started on the back foot this week," said analyst Joshua Raymond at financial spread-betting firm City Index.

"Fears over an impending interest rate rise in China, and with details set to emerge on reform of financial regulation in the United States, investors have looked to sell out of part of their holdings in Europe today."

The Greek debt crisis was expected to top the agenda at a crucial meeting of eurozone finance ministers in Brussels.

Finance ministers from the 16 eurozone countries were also expected to argue over longer-term ways of helping member economies in trouble, for example through emergency loans and a new European monetary fund.

The Greek crisis has caused severe strains for the eurozone and therefore for the wider European Union which has forced the Greek government to announce enormous budget cuts and reforms of its economy.

"Greece could take another small step forward in the next few days if meetings of the eurozone and EC finance ministers produce firmer pledges of support than the vague statements of support so far," said Capital Economics analyst Ben May.

US stocks pulled back yesterday as investors took a breather on the eve of a Federal Reserve monetary policy meeting and fretted about possible interest rate hikes in China and India.

The Dow Jones Industrial Average was down 0.31 per cent at 10,591.97 while the Nasdaq composite had lost 0.71 per cent to reach 2,350.82 at mid-day.

The US central bank's Federal Open Market Committee is widely expected to hold the benchmark interest rate at near-zero today, but the market will pore over the policymakers' statement for clues on the direction of monetary policy and the economic outlook. Fred Dickson at DA Davidson & Co. said that investors would scrutinise the central bank's current assessment of the economic recovery.

"Investors will also be looking for signs from the Fed as to their decision making process for deleveraging its massive balance sheet and beginning to lift interest rates," analyst Fred Dickson at DA Davidson & Company said.

Trading sentiment was also dented by lingering concerns that China will take steps to cool inflation after reporting last week that consumer prices accelerated 2.7 per cent year-on-year in February.

"Concerns over tightening monetary policy in China weighed on market sentiment as investors were afraid that an economic recovery in the region will be compromised," Grand Cathay Securities analyst Mars Hsu said.

In earlier Asian trading yesterday, Hong Kong and Chinese stocks closed lower on prospects for tighter Chinese monetary policy.

Hong Kong's benchmark Hang Seng index dipped 0.62 per cent while Shanghai shed 1.21 per cent to 2,9786.94.

Elsewhere, Tokyo, the stock market ended flat yesterday as profit-taking offset buying on expectations of further monetary easing measures in Japan.