European stock markets closed lower and the euro edged down on Thursday after European central banks held key interest rates at record low levels and debt-stricken Greece approved new austerity measures.
Financial markets are still concerned about how the Greek debt drama will unfold and that President Barack Obama's re-election has raised the spectre of a bitter fiscal stand-off in Washington.
After spending most of the day in the black, London's FTSE 100 index of top companies reversed course to close down by 0.27 percent at 5,776.05 points, Frankfurt's DAX 30 gave up 0.39 percent to 7,204.96 and the Paris CAC 40 eased 0.06 percent lower to 3,407.68 points.
In widely expected moves, the Bank of England and European Central Bank held their main lending rates at 0.50 percent and 0.75 percent respectively.
"Both the Bank of England and the European Central Bank kept their monetary policies unchanged at their respective meetings today, raising some slight concerns that the stimulus spigot is getting tighter," said Christopher Vecchio, Currency Analyst at DailyFX.
"In the BoEs case, this is likely, at least through the first few months of 2013, but for the ECB, another rate cut could be on the horizon," he said.
After the rate decisions, "attention is now on Mondays EU meeting where ministers will cast their verdict on the Greek deal," said Ishaq Siddiqi at ETX Capital
Eurozone finance ministers are to decide whether to release a long-awaited installment of financial aid to Greece, which posted on Thursday a record level of unemployment at 25.4 percent of the workforce.
In Frankfurt, ECB President Mario Draghi welcomed a sweeping austerity package passed by Greek lawmakers on Wednesday to unlock its critical international aid.
"The ECB certainly welcomes the outcome of the vote yesterday as a very important step. It really represents progress," Draghi told a news conference.
In New York, US stocks also opened on an upbeat note but then fell into the red.
In midday trades, the Dow Jones Industrial Average gave up 0.18 percent while the broad-based S&P 500 was off by 0.27 percent and the tech-rich Nasdaq Composite slipped by 0.31 percent.
In foreign exchange activity, the euro fell to $1.2717 from $1.2767 late in New York on Wednesday.
"The euro is struggling to get back on its feet," Commerzbank analysts noted.
"Scepticism toward the euro remains a constant feature amongst market participants at present," they added.
On sovereign bond markets, the rate on 10-year Spanish debt jumped to 5.851 percent from 5.693 percent, while the comparable Italian rate rose to 5.019 percent from 4.908 percent.
Traders pointed to uncertainty about whether Spain would bow to market pressure and formally ask for financial aid.
Gold prices edged up to $1,717 an ounce from $1,715.25 on Wednesday, when Greek lawmakers approved huge cutbacks creditors had demanded to unlock aid that Athens needs to avert bankruptcy.
Budget cuts totalling 18.5-billion-euro ($23.6 billion) won a narrow majority as thousands of anti-austerity protestors demonstrated around parliament in Athens.
The measures to be implemented by 2016 include raising the retirement age to 67, slashing benefits and cutting the minimum wage.
The package was required for Greece to unlock a 31.5-billion-euro tranche of aid from its troika of international creditors -- the European Union, International Monetary Fund and ECB.
On the corporate front, shares in Siemens jumped 1.80 percent to 80.27 euros, while Commerzbank plummeted by 5.77 percent to 1.42 euros after the second biggest German bank's return to profit in the third quarter fell short of expectations.
Britain's second-biggest insurer Aviva climbed 0.55 percent to 330.30 pence as the company announced a drop in sales and confirmed it was in talks to sell its US business.
Washington was in focus after Obama's solid win on Tuesday despite a dragging economy and the stifling unemployment that haunted his first term.
Investors were concerned that a deeply divided Congress would not be able to reach an agreement to avoid a so-called fiscal cliff at the end of the year that many say would send the United States back into recession.
The fiscal cliff refers to a combination of deep spending cuts and huge tax hikes due to take effect on January 1.
The package, estimated to be worth 600 billion euros, is a major threat to the economy.
If it kicks in, the United States' slow recovery from the financial crisis could be reversed and the economy tip back into recession, which would in turn deal a major blow to the global economy.