EUROPE MARKETS: Jitters Over Greece Cap Gains In European Stocks

By Sara Sjolin, MarketWatch

Athex Composite slides almost 2%

European stocks showed mixed moves on Tuesday, with most markets struggling for direction as concerns about Greece's bailout negotiations continued to nag.

The pan-European Stoxx Europe 600 index climbed 0.3% to 397.94, getting a boost from British shares (http://www.marketwatch.com/storyno-meta-for-guid). The U.K.'s FTSE 100 index put on 0.4% to 7,010.94 after being closed for the Early May Bank Holiday on Monday, when other European markets posted solid gains (http://www.marketwatch.com/storyno-meta-for-guid) on the back of some better-than-expected eurozone manufacturing data.

Greek jitters: Greece's debt crisis was back in the spotlight on Tuesday, as the anti-austerity government continued bailout talks with its eurozone lenders. Athens is facing a 750-million-euro ($832 million) debt repayment to the International Monetary Fund next week, but there are fears it will run out of cash unless it reaches a deal with creditors to unlock the next tranche of bailout money.

Austrian Finance Minister Hans Joerg Schelling told Reuters on Tuesday that progress is being made (http://www.marketwatch.com/story/greek-bailout-talks-making-progress-says-schelling-report-2015-05-05), but that it remains unclear whether a deal will be struck in time for the eurozone finance ministers' meeting on Monday.

The negotiations have been going on since Greece and its lenders agreed on a bailout extension in February, and the two sides are struggling to agree on which reform measures the country must undertake to receive the next portion of aid. One of the creditors, the IMF, fears Greece's debt burden is becoming unsustainable again, and it has warned it may withhold bailout money (http://www.ft.com/cms/s/0/72b8d2ae-f275-11e4-b914-00144feab7de.html#axzz3ZFIVA7wT) unless the eurozone agrees to debt relief, the Financial Times reported Monday. Eurozone officials have categorically ruled out a write-down on Greece's debt.

Christian Schulz, senior economist at Berenberg, said in a note that debt relief could carry "moral hazard" as it would "reward Greece for reckless economic behavior at the expense of its eurozone partners."

"Without structural reforms, and particularly without reversing previous structural reforms, Athens will not be able to pay back its debt," he said.

Greece's Athex Composite Index slid 3.3% to 798.76 on Tuesday, while the yield on 10-year Greek government bonds climbed 50 basis points to 10.93%.

Other markets: Elsewhere, Germany's DAX 30 index slipped 0.1% to 11,607.30, while France's CAC 40 index fell 0.1% to 5,077.16.

A strike by train drivers in Germany (http://www.marketwatch.com/story/germany-braces-for-rail-strike-as-train-drivers-walk-out-2015-05-05) has brought most of the country's long-distance rail traffic to a halt, threatening a blow to its export-driven economy.

EU forecasts:In its spring economic forecasts (http://www.marketwatch.com/story/eu-lifts-eurozone-growth-forecast-2015-05-05-5485346), the European Commission struck an upbeat tone on most of the eurozone, but sharply downgraded the outlook for Greece. For 2015, the EU's executive arm now expects the Greek economy to grow by 0.5%, compared with a previous forecast of 2.5%.

For the eurozone, the commission now sees 1.5% economic growth in 2015, up from the 1.3% forecast previously.

Movers: Shares of UBS AG rallied 6.9% after the Swiss bank reported first-quarter profit that beat analyst expectations (http://www.marketwatch.com/story/ubs-profit-rises-sharply-beating-forecasts-2015-05-05).

Glencore PLC (GLCNF) dropped 1% after the miner reported a year-on-year drop in first-quarter copper production (http://www.marketwatch.com/story/glencore-copper-production-drops-after-shutdown-2015-05-05).

Adidas AG picked up 2.3%. The German sporting-goods giant reported an 8.2% rise in first-quarter profit (http://www.marketwatch.com/story/adidas-profit-up-82-helped-by-china-sales-2015-05-05), boosted by sales growth in Western Europe and China.

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