European stocks drop despite Cypriot bailout

Europe's main stock markets fell Friday as the eurozone approved the Cyprus bailout and extended repayment terms for Ireland and Portugal by seven years, with US banking results failing to turn around sentiment.

London's FTSE 100 index of top companies dropped 0.30 percent to 6,390.33 points, Frankfurt's DAX 30 shed 1.25 percent to 7,773.49 points and in Paris the CAC 40 lost 0.84 percent to 3,744.12 points.

The euro meanwhile slid to $1.3055 from $1.3103 late in New York on Thursday, when it had spiked to $1.3138 -- a level last seen on February 28. Gold prices eased to $1,548 per ounce on the London Bullion Market, from $1,565.

Eurozone finance ministers formally approved Friday the terms of a Cyprus debt bailout, after some confusion over whether it needed revision, saying it could now go ahead once cleared by national parliaments.

But that failed to impress the markets.

"Anyone who thinks that the approval of the Cyprus bailout will be the end of things is living in a parallel universe," said CMC Markets analyst Michael Hewson.

With the bailout decimating its revenue-generating financial sector there is little prospect to balance the economy, he noted, and stuck within the eurozone Cyprus can't devalue to become competitive in tourism with nearby Turkey.

"Cyprus will be an ongoing sore for European leaders for some time to come," concluded Hewson.

The country is now facing a 23 billion euro funding gap, up from 17 billion, given the 15 percent contraction the country's economy is now estimated to face this year, with EU-IMF bailout still fixed at 10 billion euros.

Eurozone finance ministers also favour giving bailed-out Ireland and Portugal an extra seven years to repay the aid they received to save them from collapse, Eurogroup head Jeroen Dijsselbloem said.

Extending the loan repayment period will provide a big boost for the sustainability of public finances in the two countries, reducing the amount they will need to borrow and therefore easing their return to private debt markets.

Aside from the eurozone, investors were also poring over the latest earnings in the United States on Friday.

JP Morgan and Wells Fargo kicked off the corporate earnings season for the major banks.

"US banks are expected to be one of the strongest performing sectors in the current earnings season, although they may not necessarily be quite as strong as the last few quarters," said Alpari analyst Craig Erlam ahead of the announcements.

However, JPMorgan Chase reported a 33 percent increase in quarterly earnings, and pointed to a gradually improving economy.

Net income for the US banking giant came in at $6.5 billion on revenues of $25.1 billion, compared with profits from one year ago of $4.9 billion on $26.1 billion in revenues.

"We are seeing positive signs that the economy is healthy and getting stronger," said JPMorgan chief executive Jamie Dimon.

Meanwhile Wells Fargo reported a 22 percent increase in quarterly earnings compared with last year, as credit quality continued to increase with the improving housing market.

Net income for the quarter rose to $5.2 billion on $21.3 billion in revenues, compared with $4.2 billion on revenues of $21.6 billion in the year-earlier period.

The bank, the largest US mortgage originator, reported improving credit quality as the housing market steadies. Wells Fargo reduced its provision expense to $1.2 billion in the quarter, from $2 billion in the year-earlier quarter.

But US stocks opened lower after a government report showed a drop in March retail sales.

The Dow Jones Industrial Average dropped 0.30 percent to 14,821.19 points in early trade.

The broad-based S&P 500 fell 0.44 percent to 1,586.38, while the tech-rich Nasdaq Composite Index gave up 0.36 percent to 3,288.41.

The losses came after the Commerce Department reported a 0.4 percent drop in March retail sales compared with February. Sales were down over a number of key categories: auto, electronics, food and beverage, health spending and gasoline.

Asian equities mostly fell on Friday at the end of a strong week, despite another record day for US stocks on Wall Street fuelled by upbeat jobs data.

Dealers are keeping tabs on the currency markets as the dollar approaches the 100-yen level, not seen for four years.

Tokyo stocks fell 0.45 percent, with profit-takers moving in to reap the benefits of a rally of about 10 percent since the Bank of Japan's huge stimulus plan was announced last week.

Seoul lost 1.31 percent amid simmering tensions on the Korean peninsula.

Hong Kong stocks edged slightly lower but Sydney rose 0.13 percent.