PARIS — European stock markets were mostly flat Thursday as traders shied away from riskier assets as the year drew to a close, even as Italy successfully tapped bond market investors for more cash for the second day running.
In a sign that nerves remain as the trading year comes to a close, the euro was near one-year lows against the dollar and a decade-low against the Japanese yen. In relatively thin trading, which often accentuates movements, the euro fell to $1.2883, its lowest level since Jan. 10 and not far from its 2011 low of $1.2860. Against the yen, it fell to 100.33 yen, a ten-year low.
Another money-raising exercise from Italy's monetary authorities did little to shore up stocks or the euro, even though borrowing rates fell for the second day running. In total, Italy raised around €7 billion ($9.2 billion) in the four auctions.
In the most keenly-awaited auction, the Bank of Italy reported that Italy raised €2.5 billion ($3.3 billion) of ten-year bonds at an average yield of 6.98 percent. That's lower than the 7.56 percent it had to pay at an equivalent auction last month, when investor concerns over the ability of the country to service its massive debts became particularly acute and effectively prompted a change in government.
However, the country's borrowing rate on the key 10-year bond remains uncomfortably close to the 7 percent level widely considered to be unsustainable in the long run. Greece, Ireland and Portugal all had to request financial bailouts after their 10-year bond yields pushed above 7 percent.
In the secondary markets, the ten-year yield continues to hover around the 7 percent mark and the euro continued
Markets had grown fearful over the past few months that Italy will find it difficult to pay off its massive debts, which stand at around €1.9 trillion ($2.5 trillion). Next year alone, Italy has some €330 billion ($431 billion) of debt to refinance.
In another sign of unease, banks continued to park large amounts of money overnight at the European Central Bank, reflecting strains in the interbank lending market and a massive €489 billion infusion of cheap, long-term central bank credit into the banking system last week. The amount deposited overnight Wednesday was an elevated €436.58 billion ($570.78 billion), down from a record €452.03 billion from Tuesday.
The large deposits suggest banks are temporarily holding some of their borrowings from last week there. It also suggests that banks are afraid to lend to each other on the interbank market, preferring to hold cash risk-free at the ECB even at low interest rates.
The large ECB loans were aimed at steadying the banking system during Europe's government debt crisis. Many banks are having trouble raising money elsewhere because of fears that they may suffer losses on government bonds issued by heavily indebted governments.
Given the backdrop of ongoing worries over Europe's debt crisis, stocks have recovered little of Wednesday's losses.
In Europe, the FTSE 100 index of leading British shares was up 0.1 percent at 5,515 while the CAC-40 in France rose 0.1 percent too to 3,076. Germany's DAX was 0.4 percent higher at 5,793, though it had borne the brunt of the selling in the previous session.
Wall Street was headed for a higher opening, with Dow Jones industrial futures gaining 0.2 percent at 12,099. Broader S&P 500 futures rose 0.1 percent at 1,245.80.
Earlier in Asia, however, investors booked losses amid light trading. Japan's Nikkei 225 index fell 0.3 percent to close at 8,398.89. Hong Kong's Hang Seng Index closed 0.7 percent lower at 18,397.92.
Oil markets were subdued with the benchmark New York rate up only 5 cents at $99.41 a barrel.
AP Business Writer Pamela Sampson in Bangkok contributed to this article.