European stocks fall as investors fret over Greece

LONDON (AFP) – European equities dipped on Thursday, dragged down by fears about the Greek debt crisis, as investors set aside encouraging 2009 results from Britain's state-rescued Royal Bank of Scotland.

In late morning trade, London's benchmark FTSE 100 index eased 0.02 percent to 5,341.86 points, Frankfurt's DAX 30 nudged down 0.04 percent to 5,614.21 points and in Paris the CAC 40 fell 0.25 percent to 3,706.23.

The DJ Euro Stoxx 50 index of top eurozone shares decreased 0.26 percent in value to 2,727.97 points.

In foreign exchange trade, the euro plunged to a one-year low against the yen as investors shunned riskier currencies for the safe-haven Japanese unit amid the public deficit crisis afflicting Greece.

The single currency took a beating on news overnight that Standard & Poor's Rating Services warned of downgrading Greece by one or two notches within the next month, dealers said.

"The landscape turned for the worse again overnight as fears of a Greece bailout escalated," said economist Kenneth Broux at Lloyds Banking Group.

Greece entered a new phase of tense uncertainty over its programme to slash overspending on Thursday when European Union and IMF experts prepared to leave Athens with their findings of an audit of national finances.

Their visit came as tens of thousands of people took to the streets of Greece on Wednesday to protest the Socialist government's austerity measures.

Greece is at the centre of a crisis threatening cohesion of the eurozone over huge debt and budget deficits, and credit rating downgrades, as well as weak credibility owing to inaccurate data in the past.

Debt woes in the eurozone also returned to the spotlight in Asia on Thursday.

Hong Kong retreated 0.33 percent and Tokyo fell by 0.95 percent as traders fretted over the Greek debt crisis and concern over the US economic recovery.

"Sentiment turned sour across Asia ... on renewed worries over Greece," Taurus Investment & Securities analyst Lee Kyung-soo told Dow Jones Newswires.

Greece's budget deficit is currently more than four times over the allowed EU limit at 12.7 percent of output, as the government faces debts of around 300 billion euros (407 billion dollars) and a deepening recession.

In London, meanwhile, investor sentiment was partly lifted by news of narrowing losses at Royal Bank of Scotland, which is 84-percent owned by the British government after a series of enormous bailouts.

RBS said net losses improved last year to 3.6 billion pounds, adding that Chief Executive Stephen Hester has waived his bonus due to public anger over bankers' pay.

The loss, equivalent to 4.09 billion euros or 5.5 billion dollars, was better than market expectations for a shortfall of 5.2 billion pounds, according to analysts polled by Dow Jones Newswires.

In reaction, RBS shares soared 7.09 percent to 38.69 pence as investors welcomed the results.

In Wall Street action on Wednesday, shares rebounded strongly as sentiment got a lift from Federal Reserve chief Ben Bernanke's signal that near-zero US interest rates were still needed.

The Dow Jones Industrial Average climbed 0.89 percent to 10,374.16, a day after triple-digit losses on economic recovery worries.

Bernanke had Wednesday signalled to lawmakers that the US central bank was not ready to abandon its ultra-low interest rates as it tries to keep a tentative economic recovery on track.