European markets retreated overnight as Italian bonds declined and the cost of insuring European government debt rose to another record high.

The FTSE shed 12 points (0.2%) to settle at 5128, whilst the CAC was flat and the DAX slipped 30 points (-0.5%).

There was some early strength in the eurozone session but this was snuffed out by comments from German Chancellor Merkel who ruled out joint euro-area borrowing.

Euro bonds are 'not needed and not appropriate' was her comment, delivered at a press conference with Italian PM Mario Monti and French President Sarkozy.

The comments saw the euro weaken 0.3% against the yen and 0.1% against the Swiss franc. The yen advanced against all but two of its major counterparts.

Oil bounced back from its lowest level in two weeks following a surprise drop in US stockpiles. Crude for January delivery rose as much as $1.01 to settle at US$97.18.

There is no major local data due out for today's session.

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Morning Market Analysis: Euro Woe Continues is a post from: Australian Stock Report Market Pulse Blog