Concern over how Greece's debt talks play out overshadowed the appetite for riskier assets on Wednesday, despite good economic data from Germany and a widely held view that the U.S. Federal Reserve is set to signal an extended period of ultra-low rates, Reuters reported. The euro and European stocks fell, while a fairly lackluster earnings season so far kept most U.S. stocks on Wall Street under the weather. But Apple Inc's blow-out quarterly results late Tuesday helped lift the technology-rich Nasdaq. Growing worries the European Central Bank may have to write down its holdings of Greek bonds to help restructure the country's mountain of debt and unlock the funds needed to avoid a messy default hurt the euro and lifted safe-haven German government bond prices while also pushing up Italian yields. International Monetary Fund Managing Director Christine Lagarde added to Greek debt concerns by saying public sector creditors may need to participate in the restructuring if bond losses negotiated with the private sector are not enough to make Athens' debt sustainable. Investors fear that any increase in the costs borne by the ECB to reach a deal with Greece will cut the funds available to help other indebted euro zone nations. The Greek government said it hopes to complete talks on a deal with its private creditors as early as this week, despite euro finance ministers' rejection of an initial plan. The resurgent Greek debt concerns extinguished modest demand for the euro after a widely watched German business sentiment index beat expectations and rose for the third straight month in January, suggesting Europe's largest economy may avoid a recession. The euro fell back under $1.30 against the U.S. dollar to be down about 0.5 percent at $1.2962. The Dow and S&P 500 fell as the unresolved Greek debt talks and a 20 percent rally in U.S. equities since October lows weighed on U.S. investor sentiment. The Dow Jones industrial average was down 81.97 points, or 0.65 percent, at 12,593.78. The Standard & Poor's 500 Index was down 6.04 points, or 0.46 percent, at 1,308.61. The Nasdaq Composite Index was up 4.77 points, or 0.17 percent, at 2,791.41. Recession fears in Europe outside of Germany gained some traction when Britain reported its economy had contracted more than expected in the fourth quarter as factory and utility output slumped. Four out of the UK's top five export markets are in the euro zone. The pan-European FTSEurofirst 300 index fell about 1 percent to 1,034.96, weighed down by the technology sector despite Apple's results. The tech sector weakness was due to a 14 percent fall in the share price of world No.1 mobile gear maker Ericsson after it reported that profits had halved in the fourth quarter as the global economic slowdown hit demand for new equipment. The STOXX Europe Technology index was down 2.5 percent. German manufacturing conglomerate Siemens also saw its shares fall for a second successive day, down 4.1 percent, after reporting weak results as the euro zone crisis takes its toll on consumer demand. The dollar index, which measures the U.S. currency against six other key currencies, hovered near a three-week low just below 80 ahead of a statement expected from the Federal Reserve's key policy making committee later on Wednesday. -- SPA
