OREANDA-NEWS. European stock markets traded mixed Friday, as deflation worries deepened for the eurozone, which was locked in crucial talks with Greece over a possible restructuring of debt.

London's benchmark FTSE 100 index dropped 0.17 percent to 6,798.79 points in afternoon trade.

Frankfurt's DAX 30 rose 0.04 percent to 10,741.63 points, with early gains won thanks to an improved showing on Wall Street giving way to deflation fears.

The CAC 40 in Paris slipped 0.22 percent to 4,621.29 points compared with Thursday's close.

European markets did not get any support from across the Atlantic, where US stocks opened mostly down.

Five minutes into trade, the Dow Jones Industrial Average lost 0.16 percent and the broad-based S&P 500 fell 0.38 percent.

Eurozone consumer prices fell by a record 0.6 percent in January, confirming deflation could be taking hold for the long term, EU data showed Wednesday.

The drop from minus 0.2 percent in December appears to back the European Central Bank's decision last week to launch a bond-buying spree to drive up prices.

Plummeting world oil prices were largely to blame for the fall in the 19-country eurozone, already beset by weak economic growth and high unemployment, the EU's data agency Eurostat said.

"Big news out of the eurozone... as falling energy prices continue to keep the economic storm clouds hovering," said Daniel Sugarman, market strategist at ETX Capital trading group.

The minus 0.6 inflation rate matches the same record drop in prices the eurozone set in July 2009 at the worst of the global financial crisis.

"Deflation is particularly worrying in the eurozone given the high levels of indebtedness in many members, as falling prices increase the real value of the debt, making these debts harder to service," said Ben Brettell, senior economist at Hargreaves Lansdown stockbrokers.

"Deflation is now widespread in both the core and periphery of the eurozone, with Germany the latest to join the party."

Official data Thursday showed that inflation in Germany, Europe's biggest economy, dipped into negative territory in January for the first time in five years.

- EU jobless rate falls -

There was better news Friday on the unemployment front as the eurozone jobless rate fell to at 11.4 percent in December, its lowest level since August 2012.

Elsewhere Friday, Greece's new anti-austerity government opened negotiations with its eurozone partners in what promises to be a bitter confrontation over its 240-billion-euro international bailout.

Prime Minister Alexis Tsipras began talks with Jeroen Dijsselbloem, the current head of the eurozone group of finance ministers in an encounter that Athens said would mark the start of Greece's bid to change the conditions of the bailout.

On the corporate front, shares in IAG, parent of British Airways and Spanish carrier Iberia, fell 1.33 percent to 556.5 pence after Qatar Airways said it had purchased almost 10 percent of the group.

The move represents something of a change for Qatar Airways, as its chief executive Akbar al-Baker has publicly criticised European carriers, saying earlier this month that they "cannot keep up" with competition from Gulf carriers.

IAG meanwhile is hoping to buy Irish airline Aer Lingus, which this week backed a 1.35 billion euro takeover bid.