Shares down as euro zone worries intensify

Eurostoxx 50: 2,854 (- 36.62) Frankfurt DAX: 7,267 (- 91.41) Paris CAC: 3,991 (- 36.89):EUROPEAN SHARES fell yesterday, with investors reducing their exposure to riskier assets as concerns over the euro zone debt crisis intensified after ratings agency Fitch downgraded Greece's credit rating.

Traders said a lack of positive drivers in the market pushed buyers to the sidelines, while confidence remained fragile ahead of elections in Spain and uncertainty over how Greece’s debt problems could be contained.

The pan-European FTSEurofirst 300 index of top shares closed 0.2 per cent lower at 1,136.12 points, bringing total losses for the week to 0.4 per cent.

Fitch pushed Greece’s credit rating deeper into junk territory and warned of further downgrades if a credible plan to resolve the countrys debt crisis was not found.

Banks fell on concern over exposure to Greek debt, with the STOXX Europe 600 banking index down 0.8 per cent.

Peripheral stocks slipped, with the Thomson Reuters Peripheral Eurozone Index down 2.1 per cent.

Investors will also be monitoring the local elections in Spain tomorrow, with the ruling Socialist party expected to suffer heavy losses over its handling of the economic crisis, a prominent pollster said.

Analysts said the market could be going into a period of short-term weakness on slowing earnings momentum, currency headwinds and expectations of an end to the US federal reserve’s quantitative easing programme, though longer-term fundamentals such as cheap valuations and healthy balance sheets should help limit downside pressure.

Among the fallers on the index were clothing retailers Hennes & Mauritz and Inditex, which fell 1.5 and 2.4 per cent after US rival Gap Inc slashed its full-year profit outlook on rising cotton costs.

On the upside, Associated British Foods gained 3.1 per cent after Exane BNP Paribas upgraded it to “outperform” from “neutral” on valuation grounds. Pandora A/S tumbled 23 per cent as the Danish maker of charm bracelets reported sales that missed most estimates.

Invensys Plc sank 7.4 per cent amid concern that its shares will be removed from the UK’s FTSE 100 Index after Glencore’s initial public offering. – (Reuters, Bloomberg)