LONDON: European stock markets closed lower on Wednesday while the euro rose against the dollar as investors digested a burst of merger and acquisition activity and comments by US Federal Reserve head Ben Bernanke.
Dealers said the major feature was news of the London Stock Exchange's tie-up with its Toronto counterpart which was trumped after the close by a possible Deutsche Boerse merger with the NYSE Euronext.
London's FTSE 100 index of top shares finished the day down 0.64 percent to 6,052.29 points, Frankfurt's DAX 30 slipped 0.03 percent to 7,320.90 points and the Paris CAC 40 dipped 0.43 percent to 4,090.74 points.
In foreign exchange deals, the euro firmed to 1.3696 dollars, briefly topping 1.37 dollars, compared with 1.3621 dollars late in New York on Tuesday
On London's second-tier FTSE 250 index, the London Stock Exchange saw its share price rocket at first before settling down to a a three percent rise after it announced a landmark merger deal with its Canadian counterpart.
"The merger will create a world-leading organisation and is unanimously being recommended by the boards of both LSE and TMX," the pair said in a joint statement.
The company, which will span 20 trading markets and platforms across Europe and North America, will be well-placed to tap into the booming commodities sector at a time of rocketing prices for commodities like copper and crude oil.
The transaction was billed as a merger of equals but LSE investors will hold the upper hand with 55 percent of the new group while TMX shareholders will have 45 percent. Both exchanges retain their existing brand names.
Meanwhile trading in shares of Deutsche Boerse, which runs the Frankfurt stock exchange, was suspended Wednesday, as news emerged of tie-up talks with NYSE Euronext, which was also suspended in Paris and New York.
Deutsche Boerse and NYSE Euronext said they are in "advanced discussions" on merging in order to create the world's largest stock exchange operator by revenues and profits.
The British stock market was also pulled lower as a number of top companies went ex-dividend, meaning that their shares no longer carry the right to their most recently declared dividend.
The likes of GlaxoSmithKline, BP, Shell and Unilever all dropped after losing their payout attractions.
Later in the day traders turned their attention to crucial testimony from US Federal Reserve Chairman Ben Bernanke who fended off criticism that he is ignoring the risk of rising prices as he faced a sceptical Republican-controlled panel in Congress.
Bernanke -- who was appointed by a Republican, then-president George W. Bush -- sparred with the committee's Republican members, who warned of the risks from pumping hundreds of billions of dollars into the economy to prop up growth and help reduce unemployment.
Bernanke's policies have put the Fed squarely in the middle of Washington's bitter partisan politics, a position that the bank normally works hard to avoid.
While Republicans have urged the Fed to tighten monetary policy -- and stave off the risk of inflation -- Democrats have pressed for a continuation of current policies until the unemployment rate comes down.
Elsewhere in Europe markets were all down.
Amsterdam fell by by 0.52 percent, Brussels was down 0.6 percent, Madrid lost 0.27 percent.
Swiss stocks fell back 0.11 percent and Milan finished down 0.22 percent
Asian markets mostly fell Wednesday after China hiked interest rates for the third time in four months, causing nervousness around the region.
Shanghai fell 0.89 percent, led lower by property developers, while Hong Kong tumbled 1.36 percent.
Tokyo's Nikkei index ended down 0.17 percent.
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