European stocks mostly fell and the euro slid against the dollar yesterday after Moody’s warned that its credit rating for France could be put on negative outlook, reigniting eurozone debt fears.
Shares were also hit by weaker-than-expected Chinese growth data, news which weighed heavily on Asia-Pacific shares.
The Paris CAC 40 index fell 0.79 per cent to 3,141.1 points after Moody’s warned it may place a negative outlook on its Aaa credit rating for France as the government’s financial strength “has weakened.”
The annual credit report released on Monday was a shot across the bow for the second largest economy in the eurozone, which currently enjoys the top credit rating from Moody’s and rival ratings agencies.
London’s FTSE 100 index of leading shares slid 0.49 per cent to 5,410.35 points, as investors also reacted to news that British annual inflation hit a three-year high of 5.2 per cent in September.
Frankfurt’s DAX 30 dropped around one per cent after data showed German investor confidence fell to the lowest level for nearly three years in October, but rallied to close up 0.31 per cent on 5,877.41 points. German stocks apparently benefitted from concerns about France, said traders.
“At the moment investors still consider German stocks as safe,” said Baader Bank analyst Robert Halver.
Moody’s warning weighed most on sentiment, traders said.
“It is Moody’s putting France’s prized triple A credit rating on negative watch that is getting the bears out in force today,” said Capital Spreads analyst Simon Denham.
US stocks shrugged off the France warning, and clawed into positive territory as investors sifted through a series of company earnings reports.
The Dow Jones Industrial Average was up 0.07 per cent to 11,404.72 points by 1500 GMT.
The tech-heavy Nasdaq Composite edged up 0.05 per cent to 2,616.23 points, while the S&P 500, a broader measure of the markets, advanced 0.36 per cent to 1,205.17 points.
“US stock prices continue to track in a wide trading range moving up and down on a daily basis in tandem with the movement of the euro versus the dollar in the currency market,” said Frederic Dickson at DA Davidson & Co.
In foreign exchange trade, the euro slipped to $1.3719 from $1.3734 late in New York on Monday, on fading hopes that EU leaders would unveil firm plans to resolve the eurozone debt crisis when meeting at a summit this weekend.
The dollar slipped to 76.76 yen from 76.82 yen and gold prices dropped to $1,631 an ounce from $1,682.
“The temporary rebound in riskier currencies and the euro over the past month appears to be losing momentum as investor hopes that heightened eurozone sovereign debt tensions will soon be brought to end supporting global growth are beginning to fade,” said Lee Hardman, currency economist at The Bank of Tokyo-Mitsubishi UFJ.