European equities fell from a record high at close Thursday following a negative outlook on US debt.

Stocks were trading lower following a 17-month high Wednesday when investors rejoiced over news the US had reached a budget deal to curb spending cuts and tax hikes.

However forecasters have raised concern the agreement will do little to reduce the country's financial deficit.

Lawmakers are headed for a political showdown over the next two months as they work to resolve budget issues.

The government is also tackling unemployment with the Labor Department reporting an increase in application for jobless benefits of 10,000 to 372,00 in the week ended December.

The department will release its payrolls report for December on Friday.

Portugal PM calls for action on recession

Portuguese Prime Minister Anibal Cavaco has called for urgent action to halt the "recessionary spiral" in the Eurozone, according to reports.

He also ordered a legal inquiry into Portugal's austerity policies, criticising the European Union-International Monetary Fund Troika over the fiscal tightening under the country's €78bn loan package.

Cavaco warned Europe's leaders that the current course had become "socially unsustainable".

Spanish unemployment falls

Spanish unemployment dropped by 59,100 persons in December, well below the 50,300 increase forecast by the consensus.

The number of Germans unemployed rose by 3,000 in December (consensus: 10,000). However the unemployment rate remained unchanged at 6.9%.

Next reports on profits

Next climbed 2.3% to 3,858p after the UK's second largest clothing retailer announced full-year profits would be between £611m to £625m.

Alcatel-Lucent rose 11% to €1.17 after Credit Suisse upgraded the stock to neutral from underperform, raising its recommendation on the maker of telecommunication equipment. Credit Suisse said the company's debt agreement will provide sufficient gross cash to remain a viable business in the long term.

Wacker Chemie, the German maker of polysilicon, soared 5.6% to €53.70 after the UBS added the company to the list of its most preferred chemical stocks in Europe.

Euro falls against dollar

The euro/dollar was edging lower by 0.58% to the 1.3109 dollar mark.

Front month crude futures are now falling by 0.142 to the 112.310 dollar level on the ICE.

RD

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