LONDON: European stock markets closed firmer on Wednesday in hesitant trade as investors tried to keep a fix on fast moving events in the Middle East and Japan's nuclear crisis. Dealers said the markets opened in positive territory but slipped back as disappointing US housing data and a sharp British government growth downgrade hit confidence only to recover again by the finish. Dealers said fears that the crisis at Japan's Fukushima nuclear power plant, damaged in the massive earthquake and tsunami earlier this month, could get even worse dampened sentiment overall. Reports from Tokyo of above normal radiation levels in food and water, which infants under one year old are no longer allowed to drink, spooked markets hoping that the worst can be avoided. Japan meanwhile estimated the cost of the March 11 earthquake and tsunami at 25 trillion yen ($309 billion), double that of the 1995 Kobe quake and nearly four times more than Hurricane Katrina. The prospect that the Portuguese government could collapse later Wednesday, forcing Lisbon to seek an emergency bailout, raised the ante ahead of a summit supposed to agree a comprehensive solution to the eurozone's debt problems. In London, the FTSE 100 index of leading shares closed up 0.58 percent at 5,795.88 points. In Paris, the CAC 40 gained 0.54 percent to 3,913.73 points and in Frankfurt the DAX added 0.35 percent to 6,804.45 points. London was hurt after the British government cut this year's growth forecast to 1.7 percent from 2.1 percent, as widely expected, but other tax and pro-business measures announced in the budget got a warmer welcome. Expectations had fallen before the budget because of a sharp spike in inflation and a slowdown in the economy late last year, limiting the government's room for manoeuvre.
"The theme today is clearly Portugal, Libya and Japan which have been largely priced in by the markets, unless there is a major development," said Yves Marcais, dealer at Global Equities in Paris. If the Portuguese government were to lose a parliamentary vote on its austerity policies, the fear is that it would then have no option but to appeal for outside help, Marcais said. Francois Duhen, analyst at CM-CIC Securities, said the situation in Portugal is overshadowing the EU summit in Brussels which is supposed to agree a comprehensive set of measures to resolve the eurozone debt crisis. However, in the event the Portuguese government does fall, then EU leaders will find their choices even more limited, Duhen said. Lisbon closed down 0.99 percent before the vote was called. In New York, the blue-chip Dow Jones Industrial Average was up 0.23 percent at around 1700 GMT while the high-tech Nasdaq Composite index was little changed.
"Japan, which warned of dangerous levels of radioactive iodine in Tokyo's tap water, and Libya (are) likely to remain in the Street's crosshairs," said Andrea Kramer of Schaeffer's Investment Research.
In Asian trade earlier Wednesday, Japanese shares closed sharply lower, falling 1.65 percent after jumping more than seven percent over the previous two sessions on hopes the Fukushima emergency could be controlled. Hong Kong slipped 0.14 percent but Shanghai gained 1.01 percent and Sydney up 0.19 percent.
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