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Earlier gains wiped out as fears over default by Greece persist

IT was another disappointing day across European markets yesterday.

Earlier gains softened and then evaporated as the chink of optimism that came into play on Tuesday night when Greek prime minister George Papandreou won a confidence motion was dispelled.

Nervousness persists and is likely to do so for some time, with many investors remaining convinced that Greece will still default on its massive debt burden.

The market declines came even as new data showed that European industrial orders rose in April, and as increasing demand in Germany helped counter a slump in France and Italy. The figures suggested that the euro region's economic expansion maintained some momentum into the second quarter.

The benchmark Stoxx 600 slid 0.6pc to 268.07 by late afternoon in London. The measure has tumbled 7.9pc from this year's peak on February 17, as US economic data trailed forecasts, adding to concern that Greece will fail to repay all its debt.

"Recession fears are coming back into the market and problems around sovereign debt also bring the market in a bad shape," said Philipp Musil, who helps manage about $12bn (€8.3bn) at Semper Constantia Privatbank in Vienna.

"Investors are uncertain of what is coming next. We're still quite optimistic and we're thinking it's a normal consolidation, but it can change quite fast if we get more confirmation of a recession."

The ISEQ Overall Index remained in the black -- just about -- and was one of the few western European indices to do so.

But it was hardly anything to get excited about, with the index adding just 18 points, or 0.01pc to end the session at 2,907.60.

Many stocks yielded earlier gains, including drug maker Elan. It got approval for a new warning on a label for its multiple sclerosis treatment -- a positive for analysts. But the stock, which rose as much as 2.5pc, was down 1.17pc at €7.26 at closing. There was much better news for shareholders in clinical testing firm Icon. Its shares soared 9.06pc, or €1.45 to exit at €17.45, valuing the company at €1.02bn.

Shares in exploration firm Petroneft, which held its AGM in Dublin yesterday, slumped over 23pc, or 10c, to 33c after it reduced its oil production targets.

National benchmark indices declined in 13 of the 18 western European markets. Germany's DAX Index and France's CAC-40 each fell less than 0.1pc. The UK's FTSE-100 rose the same amount.

Dutch electronics firm Philips sank 8.5pc to €16.45, its biggest drop since March 2009. The company said it will need to deepen cost cuts to arrest deteriorating consumer demand for lighting and consumer electronics.

Suedzucker soared 4.3pc to €23.73, the highest price in at least 12 years. The maker of sugar, starch and bakery additives forecast that revenue will increase to about €6.5bn and operating profit to more than €600m in its financial year ending in 2012.

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