European shares wane after Spain’s rating cut

Europe’s top shares edged lower in early trade, with caution prevailing among investors as Moody’s became the latest rating agency to downgrade Spain, ahead of an Italian bond auction later in the session and the Greek election over the weekend.
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The FTSEurofirst 300 was down 2.27 points, or 0.2 percent, at 984.89, having closed 0.3 per cent lower on Wednesday in nervous trade as worries over global growth in the wake of the eurozone debt crisis crimped appetite for risk.

In London, the FTSE 100 index was down 13.52 points, or 0.3 per cent, at 5470.29, having gained 0.2 per cent on Wednesday. Frankfurt’s DAX 30 dipped 0.1 per cent to 6146.92 points and in Paris the CAC 40 shed 0.2 per cent to 3022.40. Madrid’s IBEX 35 index opened 0.6 per cent lower.

Moody’s action, ahead of an Italian bond auction at which borrowing costs are seen sharply rising, saw Spain’s rating cut by three notches to ‘Baa3’ from ‘A3’, while Cyprus was also knocked down, by two notches.

“Until there is more calm around Greece and Spain, one should just stay a bit on the sidelines and watch what will happen,” Heinz-Gerd Sonnenschein, equity markets strategist at Deutsche Postbank, in Germany, said.

He said stocks are attractive on price-to-book and price-to-earnings levels but until a clearer picture is formed of what will happen in Greece and Spain investors are better off adopting a wait-and-see approach to investing.

With uncertainty swirling around equity markets, riskier banking and mining shares were among the top falling sectors on the index.

BSkyB was the biggest blue-chip faller on the London bourse, dropping 6.9 per cent after the satellite broadcaster paid 2.28 billion pounds ($3.55 billion) to broadcast 116 English Premier League soccer matches per season in a new three-year deal that will start from 2013-14.

Reuters

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