By Michele Maatouk Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--European stocks fell Friday, as worries about euro-zone sovereign debt continued to haunt the markets, while fresh reports of explosions in Korea also undermined sentiment.
Investors were keen to square their positions ahead of the weekend, particularly as the U.S. markets will be open for only half a day's trading Friday due to the Thanksgiving holiday, traders said.
Basic resources suffered the brunt of the selling, closely followed by banks. The Stoxx Europe 600 resources index dropped 1.0% to 575.86, while the banks index fell 0.9% to 195.16.
By 0825 GMT, the Stoxx Europe 600 index was down 0.2% at 267.06. London's FTSE 100 index was 0.6% lower at 5667.40, Frankfurt's DAX index fell 0.2% to 6866.93, and Paris's CAC-40 index was 0.7% lower at 3735.41.
Ireland's woes were still firmly in focus Friday. "There remains real concern... given the slender majority of the Irish government, that any budget could well be impossible to adhere to by any new government, even if it were passed on December 7," said Michael Hewson at CMC Markets. "This fear has manifested itself in spiraling bond yields in the peripheral countries," he added.
"Whether or not the Irish bailout plan ultimately proves sufficient, the reality is that the near-term risk of default has effectively been removed. However, this is not to say that any longer-term concerns have been resolved. Indeed, while officials are at pains to stress that the situation in Ireland was different from that in Greece, this is actually potentially the most worrying aspect," said Lloyds TSB Corporate Markets.
Meanwhile, an equity strategy note by Citigroup seemed to reflect the general mood. The brokerage said that against a backdrop of growing concern about European debt, and confirmed by earnings trends, it maintains its preference for Northern over Southern European equity markets. "Many countries have committed to multi-year government spending cuts in order to contain and reduce their fiscal deficits. Policy makers have the difficult task of balancing debt reduction with the need to grow GDP," noted Citigroup. "Nowhere is this balancing act more precarious than in the fiscally-challenged Southern European nations," it added.
A report that the European Central Bank and most euro-zone countries are urging Portugal to follow in Ireland's footsteps and request financial aid from the European Union/International Monetary Fund added to the downbeat mood.
Meanwhile, the economic calendar is looking very light Friday, although euro-zone money supply data are due for release at 0900 GMT.
In Asia, shares ended mostly lower in quiet trade due to the U.S. Thanksgiving holiday.
Japan's Nikkei Stock Average was down 0.4%, Australia's S&P/ASX 200 rose 0.2%, South Korea's Kospi Composite lost 0.7%, Hong Kong's Hang Seng Index was down 0.8% and China's Shanghai Composite fell 0.9%.
In Tokyo, shares traded in a tight range, with the U.S. Thanksgiving holiday keeping many investors sidelined. "There are few foreign investors today, but hopes for (a robust) U.S. Christmas shopping season is keeping the Nikkei from falling," said Cosmo Securities equity strategist Toshikazu Horiuchi.
In the European foreign exchanges, sovereign debt concerns kept the euro under pressure. By 0855 GMT, the euro was trading at $1.3290, down from $1.3360 late Thursday. The dollar was at Y83.83, up from Y83.60.
Among commodities, spot gold was at $1369.50 per troy ounce, down $5.45, while January Nymex crude oil futures were down 12 cents at $83.74 per barrel.
In the bond markets the December bund futures contract was up 0.21 at 127.50.
-By Michele Maatouk, Dow Jones Newswires; +44-20-7842-9447; michele.maatouk@dowjones.com
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