Europe: Stocks drop at open

[LONDON] European stock markets fell at the start of trading on Wednesday, with all eyes on North Korea after its latest nuclear test.

London's benchmark FTSE 100 index of top companies dropped 0.3 per cent to 6,120.7 points compared with Tuesday's close.

In the eurozone, the Paris CAC 40 index slipped 0.2 per cent to 4,528.1 points and Frankfurt's DAX 30 lost also 0.2 per cent to 10,288.7.

Accendo Markets analyst Mike van Dulken said that "geopolitical risk moved up a gear thanks to North Korea".

Pyongyang on Wednesday said it had carried out a "successful" miniaturised hydrogen bomb test - a shock announcement that, if confirmed, would massively raise the stakes in the hermit state's bid to strengthen its nuclear arsenal.

Asian shares mostly fell Wednesday but Chinese markets rallied, with reports Beijing had spent billions buying shares after a more than seven percent decline in the first two trading days of the year.

The South Korean won sank against the dollar after North Korea announced it had conducted its fourth nuclear test, although there was little wider impact on regional equities.

Shanghai finally chalked up some gains as the country's central bank pumped cash into the beleaguered financial system. Experts said it was used to shore up stocks to avert a repeat of last summer's rout that saw trillions of dollars wiped off valuations.

The People's Bank of China also set its daily yuan reference rate against the dollar at its lowest level in almost five years, according to Bloomberg News.

But analysts warned the moves would cause more problems down the line as China's economy, the world's second biggest and a key driver of global growth, heads for its worst annual performance in a quarter of a century.

AFP