(MENAFN- AFP) European stock markets took the lead Friday from a buoyant Wall Street on the first trading day of the year, but the euro sank to four-year lows in response to fears of deflation.
The European single currency was hit by comments from ECB chief Mario Draghi, who said the risk of deflation in the eurozone was "not excluded" and that preparations were underway to ward off an onset of tumbling prices.
On stock markets in mid afternoon deals, London's benchmark FTSE 100 index was trading 0.21 percent higher at 6,579.58 points compared with the close on Wednesday.
Frankfurt's DAX 30 rose 0.20 percent to 9,825.50 points and the CAC 40 in Paris gained 0.30 percent to 4285.40 points.
Europe's main indices were weak all morning and only turned positive when Wall Street opened firmly in positive territory -- the Dow Jones jumped 0.37 percent while the Nasdaq gained 0.55 percent.
European markets, which shut Thursday, had steadied overall in 2014 compared with the previous year as companies balanced sluggish regional growth alongside low inflation and interest rates.
Borrowing rates in France, Spain and Italy meanwhile fell to historic lows in thin holiday trading, as investors were expecting the European Central Bank to start buying sovereign bonds to fight the threat of deflation.
- Euro woes -
In foreign exchange deals on Friday, the euro took a hammering from Draghi's comments, while the dollar extended gains ahead of the release of US factory data and following a steady stream of good news from the world's biggest economy.
Europe's single currency weakened to $1.2026, down from $1.2097 on Wednesday.
While speculation reignited over Greece possibly exiting the eurozone, Lithuania welcomed a New Year and a new currency on Thursday, becoming the last Baltic nation to adopt the euro in a bid to boost stability despite fears of inflation and eurozone debt woes.
Greece's parliament was dissolved Wednesday ahead of an early election watched warily by markets and international creditors concerned that the austerity-weary country could start unwinding unpopular fiscal reforms.
Prime Minister Antonis Samaras has warned that the financially-stricken nation may be forced out of the eurozone if the election is won by the radical leftist party Syriza which has vowed to reverse years of austerity imposed in return for financial aid.
"This month is already looking particularly important as a possible road map for the year ahead, with expectations high surrounding some form of European QE and the results of a Greek general election both due before the end of the month," said IG trading group analyst Alastair McCaig.
"Fears that a considerably more anti-austerity party will take over from Prime Minister Antonis Samaras and disrupt the fragile stability that currently exists around Europe look to be giving investors a more cautious trading mind set."
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