LONDON: European shares sank on Wednesday and the euro approached one-year dollar lows on fresh concerns about the eurozone crisis and after the US Federal Reserve decided against new economy-boosting plans.
In midday deals, London's FTSE 100 index lost 1.01 percent to 5,434.51 points, Frankfurt's DAX 30 dropped 1.35 percent to 5,696.25 points and the Paris CAC 40 dived 1.77 percent to 3,023.93.
The European single currency sank to $1.2988, its lowest level since January 12. It later stood at $1.2995, down from $1.3033 in New York late Tuesday.
"The euro is under pressure as the markets are disappointed with the outcome of the EU summit which they (see) as doing little to resolve the debt and banking crisis," VTB Capital economist Neil MacKinnon told AFP.
Investors have grown increasingly nervous about the outcome of last Friday's EU summit which agreed tighter fiscal rules for the eurozone but which many feel did not go far enough.
Twenty-six of the European Union's 27 members backed a new "fiscal compact" but Berlin's hopes for a treaty revision were dashed when Britain opted out, citing a lack of protection for the City of London financial centre.
"The market (is) realizing that the summit last week solved very little, sovereign debt is still a major issue and growth -- you can forget about it for the foreseeable future," added ETX Capital trader Manoj Ladwa.
Asian markets fell on Wednesday, with traders unconvinced by Europe's deal to save its currency and downbeat over the US Fed's lack of fresh stimulus plans.
Tokyo fell 0.39 percent, Hong Kong dropped 0.50 percent and Shanghai shed 0.89 percent.
Adding to the poor sentiment was German Chancellor Angela Merkel's opposition to raising the limit for Europe's bailout fund, highlighting cracks in the region's leadership.
"The slide in the single currency over the past 24 hours is surprising in so far that it has taken so long to come about," said CMC Markets analyst Michael Hewson.
"Against a backdrop of concerns about ratings downgrades, a lack of large scale European Central Bank intervention and Angela Merkel's reiteration that there would be no increase in the new bailout fund, it was news out of the United States that really helped push things along."
The Federal Reserve said on Tuesday it would hold interest rates steady at record lows for some time to come and that the world's top economy was growing at a moderate level while warning of severe global headwinds.
Despite its concerns over the world outlook it did not unveil any fresh stimulus measures to kickstart growth, disappointing investors who had hoped for even an indication of future plans.
The Fed meeting "was a letdown for the many investors looking for any change in policies," said Avis Wang, strategist at IG Markets in Singapore.
Wall Street turned lower, with the Dow Jones Industrial Average off 0.55 percent, the S&P 500 down 0.87 percent and the Nasdaq diving 1.26 percent.
Dealers are keeping an eye on Standard & Poor's, which is expected to pass judgement on last Friday's EU agreement this week after putting 15 of the 17 euro-member states -- including France and Germany -- on downgrade warning.
The agency last week announced the AAA status of the EU itself was under threat. Fitch Ratings predicted a "significant" economic downturn in Europe with the debt crisis likely to continue through 2012 while Moody's said the crisis remains in a "critical and volatile stage."
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