Markets fall on Greek delay

European stocks fell this afternoon as the region's leaders delayed a Greek bailout and Moody's Investors Service said it may downgrade global banks.

The Stoxx Europe 600 Index dropped 0.3 per cent to 263.37 at 3.01pm in London, paring its weekly gain to 0.8 per cent. The benchmark gauge has still rallied 7.7 per cent this year amid optimism that the euro area will contain its debt crisis and as the US economy continued its recovery.

"Greek concerns appear to be weighing down on markets," said Peter Dixon, global equities economist at Commerzbank AG. "It's beginning to look as though the end game may be a lot more messy than anticipated. A Greek exit is certainly no longer off the table," he said, referring to the possibility of the nation leaving the currency union.

Europe's creditor countries struggled to reach an agreement over a rescue of Greece, seeking more control over how future aid is spent as the country faces the threat of default over a bond payment due on March 20th. Policy makers will discuss a second bailout on February 20th.

Meanwhile, Moody's said it is reviewing the credit ratings of 17 banks and securities firms with capital-markets operations, which may result in downgrades. The announcement comes days after the company cut the ratings of six European nations including Spain and lowered its outlook on France.

Spain and France today sold €14.2 billion in their first auctions since those downgrades, getting more demand than the amount they offered. The yield on France's benchmark two-year notes fell, while Spanish borrowing costs rose.

Spain's stock-market regulator lifted a six-month ban on short-selling of financial stocks, following France and Belgium in easing restrictions.

National benchmark indexes declined in 12 of the 18 western European markets today. France's Cac 40 fell 0.4 per cent, while Germany's Dax lost 0.5 per cent each. The UK's FTSE 100 slipped 0.3 per cent, and Spain's IBEX 35 Index fell 2.6 per cent. US Jobs

Claims for jobless benefits in the US fell unexpectedly last week to the lowest level in four years, Labor Department figures showed today. First-time applications decreased in the week ended February 11th to 348,000, less than the median estimate of
365,000 in a Bloomberg News survey.

Housing starts rose 1.5 per cent to a 699,000 annual rate, another report showed. That beat the estimate in a Bloomberg News survey of 675,000.

Bloomberg