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Cyprus concerns still weight on European shares

EUROPEAN shares edged lower on Friday after four days of gains, with some traders citing concerns that Cyprus may need more bailout money as the main factor weighing on markets.

The pan-European FTSEurofirst 300, which had risen for the last four sessions, slipped 0.3pc to 1,189.31 points, while the euro zone's blue-chip Euro STOXX 50 index declined 0.6pc to 2,659.14 points.

European Union finance ministers are meeting on Friday and Saturday, with Cyprus' bailout among the top items on the agenda.

Luxembourg's finance minister reiterated on Friday that Europe and the International Monetary Fund could not increase their €10bn contribution to the bailout, but worries remain over Cyprus' economy.

Cyprus and the European Union have agreed in principle how it will provide its €13bn contribution to a bailout package, although that number is almost twice the original figure because of its sharp recession, fuelling concerns about whether the sums will add up in the longer run.

"There is the potential that Cyprus may need more money, and that may be a reason for investors to book a bit of profit on the back of the recent strong run," said Central Markets chief strategist Richard Perry.

Toby Campbell-Gray, head of trading at Tavira Securities, said investors were generally nervous ahead of the minister's meeting, in the wake of the strict bailout conditions imposed on Cyprus which hit wealthy Cyprus bank depositors.

"There is zero confidence in the EU finance ministers to come up with the correct solution. Is Cyprus a worry? Yes, but it's less of a worry than the fact that we may see another crazy course of action from the EU finance ministers," he said.


Pledges of liquidity from the European Central Bank (ECB) have supported European equity markets over the last year, with the FTSEurofirst 300 up some 5pc since the start of 2013.

But the troubles in Cyprus have highlighted how far the region's sovereign debt crisis may still have to run. Bad loans in Slovenia's banking sector suggest it may be next in line although Eurogroup chief Jeroen Dijsselbloem said the country was not on the agenda for Friday's meeting.

The festering uncertainty over the euro zone's economy caused the STOXX Europe 600 Banking Index to slip 1pc to make it the worst-performing equity sector.