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Markets hit hard over EU breakthrough skepticism

(AP) LONDON - Skepticism that European Union leaders will be able to cobble together a plan to kick-start the region's faltering economy and deal with its crippling debt crisis hit stock markets hard Wednesday.

Leaders of the 27 EU countries are to meet in Brussels later in the day for a summit that will focus on Europe's economic woes and Greece's political crisis. An election on June 17 is widely considered to be a referendum on the country's membership of the euro and that's caused big jitters in the markets over the past couple of weeks.

There had nevertheless been some hope in recent days that the summit might make progress towards shoring up Europe's defenses against financial turmoil. Any enthusiasm appears to have vanished with Germany's continued refusal to back the idea of jointly-issued eurobonds. Proponents of eurobonds say they could help mitigate the crisis by spreading debt risk across the single currency zone.

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"Hopes for today's EU summit have been well and truly chucked out of the window, as the Germans once again state their firm opposition to eurozone bonds as a means of solving the crisis," said Chris Beauchamp, market analyst at IG Index.

In Europe, Britain's FTSE 100 was 1.8 percent lower at 5,305, while Germany's DAX lost 1.7 percent to 6,328. The CAC-40 in France was 1.9 percent lower at 3,025.

The euro was also under pressure, trading 0.1 percent lower at $1.2650, near four-month lows.

Wall Street was headed for a retreat, too, with both Dow futures and the S&P 500 futures down 0.7 percent.

Europe's battle to contain its debt crisis, now well into its third year, is likely to remain the focus of attention all the way up to and beyond the Greek election.

The main concern is that political parties that are against the terms of the country's bailout package winning will win the election. If Europe then cuts off its funding to Greece, the country may face a messy exit from the euro, raising concerns among investors that other countries might follow. Some analysts say a Greek exit would herald the beginning of the end of the euro and could slam the global economy.

Another big worry for investors is a slowdown in Chinese growth, compounded by a reluctance of Chinese companies to borrow because of uncertainty about the economy.

Those concerns dented sentiment earlier in Asia. Japan's Nikkei 225 index tumbled 2 percent to close at 8,556.60, while Hong Kong's Hang Seng fell 1.3 percent to 18,786.19 and South Korea's Kospi lost 1.1 percent at 1,808.62.

Oil prices tracked equities lower, with benchmark oil for July delivery down 88 cents at $90.97 a barrel in electronic trading on the New York Mercantile Exchange.

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