LONDON: Europe's stock markets and the euro drifted lower Wednesday following mixed German economic growth data on the eve of key bond auctions and interest rate decisions in Britain and the eurozone.
In afternoon trade, London's FTSE 100 index of leading stocks dipped 0.58 percent to 5,663.40 points, Frankfurt's DAX 30 slid 0.37 percent to 6,140.07 points and the Paris CAC 40 retreated 0.37 percent to 3,198.83 points.
The euro eased to $1.2710 from $1.2775 in New York late Tuesday, having struck a 16-month low at $1.2666 on Monday. The dollar gained slightly to 76.96 from 76.80 yen on Tuesday.
US stocks also fell at opening, a day after a burst of buying sent markets higher on the promising first results of the corporate earnings season.
In the first 10 minutes of trade the Dow Jones Industrial Average fell 0.37 percent, the broader S&P 500 lost 0.30 percent and the Nasdaq Composite slipped 0.04 percent.
Germany's economy grew by a robust 3.0 percent last year but the eurozone debt crisis threw Europe's biggest economy into reverse in the final months, official data showed on Wednesday.
"The latest print on Germany's economic performance confirmed the robustness of the Europe's second largest economy as the growth was in line with expectations," said trader Anita Paluch at Gekko Global Markets.
"It cannot, however, be denied, that the growth has slowed down and as GDP contracted by about a quarter of a percent in the last quarter, which causes grounds for concerns of Germany falling into recession."
Investors also digested the latest bond auction in Germany, ahead of auctions in Italy and Spain on Thursday.
Italian Prime Minister Mario Monti, in Germany for talks with Chancellor Angela Merkel, complained that despite sacrifices Italy "has not got anything in return from the European Union, such as a drop in interest rates" on its sovereign bonds.
Italy's borrowing costs remain stubbornly above the seven-percent mark seen as unsustainable.
Markets were looking ahead to interest rate decisions from the Bank of England (BoE) and the European Central Bank (ECB).
"The FTSE opened flat before falling back on Wednesday with investors starting to refocus their gaze towards the sovereign debt situation from earnings with important bond auctions and ECB and BoE rate decisions due out in the next 48 hours," said City Index analyst Joshua Raymond.
Germany paid a record low rate at an auction of five-year bonds on Wednesday amid huge demand, suggesting nervous investors are flocking to the nation's safe-haven status to shelter from the eurozone debt crisis.
It received bids for nearly nine billion euros ($11 billion) for the four billion euros of its five-year bond offered.
The average yield, or rate of return on the bond was 0.90 percent, said the German Finance Agency, which organised the sale. It was the first time the yield has dropped below the one-percent mark.
"The German bond auction today met stronger demand from investors ... and emphasised the market confidence in Germany as one of the few safe havens of the eurozone, despite the crisis," added Raymond.
Asian shares were mostly higher Wednesday following another Wall Street rally caused by positive corporate earnings and upbeat US sentiment, although ongoing European debt woes continue to weigh.
Tokyo closed up 0.30 percent and Sydney added 0.85 percent, while Hong Kong was 0.78 percent higher.
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