Markets make modest recovery

Having sunk to new 2012 lows earlier this morning, European stocks pared earlier losses as banks recovered even as speculation deepens that Greece will leave the euro currency bloc.

French bank Credit Agricole was among the main gainers, rising by 4.5 per cent, while Societe Generale added 3.4 per cent. BHP Billiton Ltd. fell 0.7 per cent as copper slid to a four-month low. The Stoxx 600 retreated by 0.1 per cent to 245.42 at 2:08 p.m. in London.

"Markets are in an extremely negative frame of mind at the moment," said Michael Spencer, chief executive officer of ICAP Plc, adding, "I have never seen a sustained period now where financial markets have been this depressed and with little sign in the short term at least of light at the end of the tunnel".

The Stoxx 600 has fallen for three consecutive days, erasing the gauge's gains made this year, amid continued political uncertainty in Greece. The country yesterday called a new election after politicians failed to agree on a government.

U.S. and Asian stocks have extended the global selloff, while the euro fell to the lowest level in almost four months as Greek leaders today seek an agreement in Athens to form an interim government.

New elections in Greece may be scheduled for as early as June 10th, after President Karolos Papoulias failed to broker a governing coalition in meetings yesterday with Pasok party head Evangelos Venizelos and other political leaders.

"The Greek and euro crisis situation lurches from bad to worse with alarming regularity I am afraid," said Spencer. "I have felt for quite a long time that Greece's exit from the euro was matter of when, not if. I think it is better for Greece in the long run and certainly better for the euro zone".

German Chancellor Angela Merkel and new French President Francois Hollande said they would consider measures to spur economic growth in Greece as long as voters committed to the austerity demanded to stay in the euro.