STOCK MARKETS in Ireland and abroad remained tense and extremely volatile yesterday as confusion over the euro zone crisis dominated ahead of today’s crunch meeting.

European markets had initially hit 11-week highs yesterday, taking their lead from Monday’s rally after weekend discussions that saw France and Germany appear to move closer to final agreements on how to extend the €440 billion European financial stability facility, and to ringfence the region’s banks from the threat of sovereign default.

However, the rally unravelled after EU finance ministers announced that an Ecofin meeting tomorrow had been cancelled, although the full summit will go ahead.

News that Germany was opposed to the draft summit conclusions urging the ECB to continue its bond-buying programme also unnerved markets. Angela Merkel, Germany’s chancellor, has agreed to seek the approval of the Bundestag for new measures.

“Price action today has shown how difficult it is to trade in these markets,” said Kathleen Brooks, research director at Forex.com. However, she added that the Ecofin meeting’s date was “an irrelevant detail”.

“The meeting was never confirmed and it will be the EU leaders and euro zone leaders in particular, who make the final decisions about the EFSF, Greece and fiscal reform across the region.”

Much of the investor focus centred on Italy, where Italian prime minister Silvio Berlusconi is facing a potential break-up of his government after sharp criticism from EU leaders at the weekend.

All European equity markets closed lower. The Iseq finished down 1.4 per cent, on low volumes, while the FTSE slipped 22.52, or 0.4 per cent, to 5,526 at the close in London, after rising as much as 0.5 per cent and tumbling as much as 1.5 per cent. France’s CAC 40 fell 1.4 per cent, while the Frankfurt DAX slipped 0.1 per cent.

US equities fell sharply, after the Conference Board’s consumer confidence index unexpectedly dropped to a two-year low, an indicator which also weighed on European equities.

Safe-haven assets, such as bonds, rallied, with the yields on French and German bonds falling.

The euro went into retreat after reaching close to $1.40 in early trade. The single currency subsequently fell below $1.39, though its decline was less than 0.5 per cent.

Commodities were led lower by a $1 drop for Brent crude to $110.52 a barrel. – (Additional reporting: Financial Times)