LONDON: European stocks mostly fell Wednesday, despite an earlier bounce in Tokyo, with sentiment hit by fears over Japan's worsening nuclear crisis, Bahrain unrest and a ratings downgrade for Portugal.
Tokyo rallied almost six percent on bargain-hunting after a fierce two-day sell-off, leading an Asian rebound, amid stubborn concerns over a potential nuclear disaster in Japan after last Friday's deadly earthquake and tsunami.
In late morning European deals, the UK stock market was down 0.60 percent and Paris slid 0.62 percent while Frankfurt eked out a gain of just 0.06 percent.
"Given near-term uncertainties ... we expect foreign investors will stay on the sidelines till we get some clarity on the Japan situation," said Atif Latif, head of equities at Guardian Stockbrokers in London.
Japan's nuclear crisis deepened on Wednesday with another fire at a quake-hit atomic power plant and a radiation spike there that forced the temporary evacuation of workers.
Military helicopters carrying giant buckets were preparing to drop water on the stricken plant, which has been hit by four explosions and two fires since last Friday's earthquake and tsunami knocked out cooling systems.
But media reports quoting defence ministry officials said the attempt was postponed because of high radiation levels over the Fukushima No. 1 plant, 250 kilometres (155 miles) northeast of Tokyo.
"News of another fire at the Fukushima nuclear power station in Japan seems likely to ensure that equity markets remain volatile as the week progresses," noted trader Peter Stanhope at IG Markets.
In Asia, the Nikkei jumped back after suffering its heaviest two-day drop for 24 years, as crews struggled to prevent a catastrophe at Fukushima.
The Bank of Japan pumped 3.5 trillion yen ($43.3 billion) into the financial system, after offering eight trillion in same day funds Tuesday and a record 15 trillion Monday to soothe markets and ensure firms can access cash.
Tokyo's Nikkei index closed up 5.68 percent, adding 488.57 points to 9,093.72 points.
The Fukushima plant has already suffered four blasts and one other fire since it was rocked by Friday's record tremor.
"The focus of the financial markets very much remains on the efforts of the Japanese authorities to contain the nuclear reactors from going into complete meltdown that would have serious repercussions for Japan and global risk appetite in general," said economist Derek Halpenny at The Bank of Tokyo-Mitsubishi UFJ.
The official toll of the dead and missing after the quake and tsunami flattened Japan's northeast coast has now topped 11,000.
Aside from Japan, investors remain jittery over Bahrain, where King Hamad has declared a three-month state of emergency in a bid to quell protests, sparking fears of spreading unrest in the Middle East.
European markets were also hurt by Moody's downgrade of Portugal's long-term government bond ratings, which stoked jitters over the eurozone debt crisis.
"The main concerns are still Bahrain and Japan, and with the state of emergency in Bahrain and the market closing (there), there is concern about contagion," added Latif at Guardian Stockbrokers.
In Wall Street deals on Tuesday, US stocks pulled back from steep early losses sparked by Japan nuclear crisis fears, with positive remarks from the US Federal Reserve bolstering confidence in the US economy.
After dropping almost 300 points in the first half hour, the Dow Jones Industrial Average closed down 1.15 percent at 11,855.42 points.
Federal Reserve policymakers kept ultra-low interest rates and $600 billion stimulus spending in place on Tuesday, as they noted easing unemployment, a pick-up in consumer spending and growing business optimism.
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