European stocks dip as eurozone optimism fades

European stock markets fell Wednesday on profit taking as optimism faded over whether European leaders can resolve the eurozone debt crisis amid differences over strengthening the bloc's bailout fund. In early morning deals, London's FTSE 100 index of leading shares sank 0.78 percent to 5,252.14 points, Frankfurt's DAX 30 shed 1.20 percent to 5,560.49 points and in Paris the CAC 40 lost 1.15 percent to 2,988.71. Other markets posted similar losses, with Madrid and Milan down 0.99 percent and one percent respectively. The European single currency edged higher against the dollar but caution overshadowed optimism that leaders were inching towards a plan to contain Europe's crisis and avert another vicious global recession. The euro advanced to $1.3622 from $1.3590 late in New York on Tuesday. European shares had soared Tuesday on fresh hopes that European leaders will get to grips with the crisis, with London leaping 4.2 percent, Frankfurt 5.3 percent and Paris 5.74 percent. "Yesterday's recovery in risk seemed to show that markets are starting to become more optimistic about the ability of European leaders to get ahead of the crisis," said CMC Markets analyst Michael Hewson. "Given previous experience, this could prove to be a mistake given that there is precious little detail or consensus ... on what the next steps should be." The Financial Times meanwhile reported that Greece's second bailout had run into trouble, with some eurozone members pushing for private creditors to take a bigger writedown on their Greek bond holdings. "Reports in the financial press today suggest the EU is split on how to solve the sovereign debt crisis, which may dampen investor sentiment," noted Rabobank analyst Jane Foley. Asian markets mostly rose on Wednesday, after a second day of rallies on Wall Street and in Europe. But the gains, the second in a row, were tentative due to the lack of concrete evidence of a eurozone plan. Greece was meanwhile hoping for a last-minute EU-IMF rescue amid fresh protests against austerity measures after pledging a "superhuman" effort to stabilise its debt-stricken economy. A mission from the EU, the IMF and the European Central Bank was expected in Athens by Thursday to resume an audit vital to the release of debt aid funds. A key contributor to the rescue, Germany, is scheduled to vote Thursday on expanding the scope and size of the EU's rescue fund -- the European Financial Stability Facility (EFSF). German Chancellor Angela Merkel met Greek Prime Minister George Papandreou on Tuesday, pledging every assistance as Athens implements tough austerity reforms. "All eyes remain on Germany and Greece to see if they will get their next tranche of bailout funds," said Capital Spreads analyst Simon Denham. "The German chancellor faces a crucial vote of confidence tomorrow as her parliament votes on the extension of the EU bailout funds. The vote is expected to be passed. "However, the more important aspect is to what extent members of her own coalition rebel." Greece will remain in the eurozone but must meet its reform commitments in full, the head of the European Commission, Jose Manuel Barroso, said Wednesday. "Greece is, and will remain, a member of the euro area," he said in an annual address to the European parliament, countering persistent talk of Athens leaving the 17-nation eurozone. Barroso also called for the creation of joint eurozone bonds and said he would propose options in the coming weeks despite German objections. Deputies in Athens approved a controversial property tax Tuesday in a bid to plug its budget hole and help unlock the latest tranche of bailout funds needed to prevent a default that could come as early as next month. World markets have been volatile in recent weeks on fears the European debt crisis will spiral out of control and push the global economy into recession as European leaders dither on how to best tackle the situation.