European stocks dropped Wednesday, as optimism stemming from upbeat data out of Asia and robust corporate earnings failed to offset swelling fears over the future of Greece in the eurozone.
Having opened the session higher, the Stoxx Europe 600 slipped into negative territory just an hour into trading, and was down 0.4% by midmorning, lead by a near 1% decline on Athens' mains stock index.
Already on Tuesday, the Greek index tumbled nearly 3%, while bonds yield surged to multiyear highs. On Wednesday, the yield on the country's two-year debt stood at just under 29%, while the yield on the 10-year hovered around 13.3%.
Yield rise as bond prices fall and a so-called inverted curve, where longer dated bonds yield less than those that are due for repayment sooner, indicated that investors are factoring in a severely heightened probability of default.
Greek Prime Minister Alexis Tsipras is expected to meet with German Chancellor Angela Merkel at a summit in Brussels on Thursday, before eurozone finance ministers meet in Riga, Latvia, on Friday.
A deal on fresh aid, however, is unlikely to be agreed before the Eurogroup meeting on May 11, a day before Greece must pay EUR780 million ($838 million) due to the International Monetary Fund.
"Given no discernible reform progress at technical or political levels, we expect both of these occasions to be nonevents that mark another missed opportunity for Greece to avoid a descent into financial oblivion, " said Emily Nicol, economist at Daiwa Capital Markets.
European Central Bank executive board member Benoît Coeuré told a Greek newspaper Wednesday that the ECB would continue to fund Greek banks as long as they stay solvent, but that the current situation in Greece is "clearly not sustainable" and that "quick and decisive action" was necessary.
"Investors are growing tired with talk but no action," economists at Sberbank wrote in a note, adding that "a failure at Friday's eurozone summit to deliver any substantial breakthrough might prove a tipping point."
Investors attributed early gains in Europe at least partially to a strong session in Asia, where Japan's Nikkei Stock Average closed above 20,000 for the first time in 15 years Wednesday after the country registered a trade surplus in March for the first time in nearly three years.
The earnings season also offered some early support.
Roche Holding AG was one of the top climbers after the Swiss drug giant said strong growth of its core cancer franchise pushed sales 3% higher in the first quarter of the year. It confirmed its guidance for the year and suggested it will raise its dividend. Shares in Rolls-Royce Holdings also climbed sharply on news of a leadership change.
Even shares in Tesco PLC were able to cling on to gains in early trade despite the retailer reporting a huge full-year loss amid a raft of charges, capping the most tumultuous year in the grocer's 96-year history.
"Consensus forecasts for this European corporate reporting season look pretty demanding, but investors appear relaxed that their expectations will be met," said Ian Williams, economist and strategist at brokerage Peel Hunt.
Fears over Greece, though, are proving hard to quell, and recent jitters have triggered a fresh rush into assets considered to be safest during times of stress, predominantly German government bonds.