LONDON, May 8: Europe's main stock markets slid in cautious trading on Tuesday, as traders focused on upcoming interest rate decisions, offsetting positive sentiment caused by another record high for Wall Street.
London's FTSE 100 index fell 0.56 per cent to 6,566.90 points in late morning trade from Friday's close. British markets had shut on Monday owing to a public holiday.
In early afternoon trading on Tuesday, Frankfurt's DAX 30 dropped 0.92 per cent to 7,456.24 points and the Paris CAC 40 decreased 0.61 per cent to 6,034.67.
The euro eased to 1.3566 dollars.
Traders were gearing up for a key US Federal Reserve meeting on interest rates, dealers said.
The US Federal Reserve was widely expected to hold American borrowing costs at 5.25 per cent on Wednesday, as the central bank waits for either an easing of inflation or a pickup in growth.
On Thursday, the European Central Bank and Bank of England present their latest interest-rate decisions.
The ECB is expected to hold eurozone borrowing costs at 3.75 per cent ahead of a quarter-point hike in June, while the BoE is widely forecast to raise its rate in May by 0.25 basis points to 5.50 per cent.
An increase in short-term interest rates, carried out by central banks to fight inflation, increase companies' borrowing costs and therefore can weigh on individual share prices.
Concerns about higher rates meanwhile overshadowed another record on Wall Street overnight.
The Dow Jones Industrial Average rallied 0.36 per cent to close at 13,312.97 points on Monday, after setting an intraday record high of 13,317.69.
It came amid renewed merger fever over US aluminum giant Alcoa's 33-billion-dollar (24-billion-euro) hostile bid for Canadian rival Alcan.
In London, a jump in Reuters' share price helped to limit losses. The British provider of financial news and data rose 4.38 per cent to 642.75 pence after announcing that its smaller rival Thomson Corp. was considering a bid for Reuters worth 8.77 billion pounds (12.86 billion euros, 17.49 billion dollars).
Based on Thomson's share price at the close of trading on Monday, the bid values each Reuters share at 697 pence.
Last Friday, the price of shares in Reuters had surged by 25 per cent. This was after the group had announced a takeover approach from an unnamed suitor, which turned out to be Thomson.—AFP
