LONDON: Global stock markets edged down on Tuesday as investors worried about the impact of a strong dollar on U.S. company earnings and unease over Greece's debt crisis overshadowed news of a possible merger between two big European telecoms equipment firms.
As investors awaited U.S. retail sales data that could add to the case for rate hikes from the Federal Reserve later this year, the dollar traded close to a 12-year high against a basket of a major currencies.
News that Finland's Nokia was in talks to buy smaller French telecoms gear maker Alcatel-Lucent in a deal that could create a group worth over 40 billion euros ($42 billion) earlier lifted European stocks to 14-year highs.
But despite a denial from its prime minister, investors were spooked by a report that cash-strapped Greece was preparing for a debt default, and shares in Greek banks skidded.
"Even if there's been an official denial, investors remain concerned by the risks of a Greek default," Mirabaud Securities' senior equity sales trader John Plassard said.
The FTSEurofirst 300 index of top European shares was down 0.2 percent at 1,643.42, having earlier touched its highest since November 2000.
That followed a 3.7 percent jump last week, helped by further declines in an already weak euro that is seen supporting an economic recovery and boosting corporate profits.
The single currency was around 1 U.S. cent away from a 12-year low against the dollar on Tuesday, and hit a two-year low against the yen after a senior Japanese official indicated the yen might have fallen too far.
U.S. EARNINGS
U.S. stock index futures pointed to a slightly weaker opening on Wall Street ahead of the retail sales data due at 1230 GMT, and on a busy day for U.S. earnings.
While JPMorgan, the biggest U.S. bank by assets, beat expectations, health care giant Johnson & Johnson attributed a fall in quarterly profit to the impact of a strong dollar on overseas revenue.
"Given the wobbly start to the year in the U.S., a stronger dollar and the plunge in oil prices, I think it could be a really rough ride culminating in the first decline in earnings in six years," said Craig Erlam, a senior market strategist at forex broker OANDA in London.
Adding to a cautious mood among investors on Tuesday, the World Trade Organisation cut its forecasts for trade growth to 3.3 percent this year and 4 percent in 2016, citing sluggish economic growth and political tensions.
Earlier in Asia, Chinese shares struggled to build on seven-year peaks a day before the country updates on economic growth, while much of the rest of Asia took a breather after recent hefty gains.
In commodities, crude prices rose on expectations U.S. shale oil output will record its first monthly decline in over four years, but analysts said the broader market remained oversupplied as China's exports rose.
Gold dropped for a fifth session in six as a firmer dollar dragged prices back below $1,200 an ounce.
German 10-year bond yields hit new lows in a broad fall in euro zone yields on Tuesday as European Central Bank asset buying helped markets overcome supply pressure in the busiest week of the year for debt sales.
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