European Stocks Fall After Greece Talks Stall

European stocks fell Thursday, after finance chiefs from the region cut short negotiations over a Greek deal, citing significant divisions on pension cuts and other conditions.

In early trade, the Stoxx Europe 600 slipped 0.5%, while Germany's DAX lost 0.4% and France's CAC dropped 0.6%. Greece's Athex fell 0.7% taking declines so far this month to over 6%. Outside the eurozone, the U.K.'s FTSE 100 was 0.2% lower.

Overnight, eurozone finance ministers called off a key meeting after little more than an hour, saying that Greek Prime Minister Alexis Tsipras first had to agree on budget cuts and policy overhauls with the three institutions overseeing the country's bailout.

The two sides are due to reconvene later Thursday morning with the hope of reaching an agreement on the aid measures.

Earlier in the week, stocks had rallied with investors sensing a breakthrough in negotiations.

However, Barclays economists, in a note on Thursday, said that some of that "euphoria" had diminished. "The situation remains very tense, particularly with respect to the banking sector," they added.

Lee Hardmann, a strategist at Bank of Tokyo-Mitsubishi UFJ, wrote in a note that failure to reach an agreement by the end of the week "would increase the likelihood that capital controls will soon need to [be] implemented in Greece as deposit flight from Greek banks would likely accelerate."

Athens' main stock index is down 5.4% so far this month. Shares in the country's four biggest banks have all lost between 25% and 58% in value so far this year.

Greek bonds, which sold off sharply Wednesday after rising earlier in the week, were higher on Thursday morning. The yield on the country's two-year benchmark bond was at 21.4%, around a fifth of a percentage point lower on the day. Trade, however, remains very thin, strategists say. Yields rise as bond prices fall.

Demand for assets considered safest during times of market stress continued to support German government bonds, sending the yield on the 10-year benchmark bond to 0.83%, around 0.02 percentage point lower in the day.

The euro was 0.1% higher against the dollar at around $1.119.

In Asia on Thursday, stocks slipped too, with strategists citing concerns over Greece. The Nikkei Stock Average ended the session 0.5% lower at 20,771.40.

In commodity markets, Brent crude was 0.1% higher at $63.58 per barrel. Gold added 0.3% to $1,176.10 per troy ounce.

Write to Josie Cox at [e-mail]

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