Forexpros – European stock markets were lower during early European trade on Tuesday, as the possibility of a credit rating downgrade for Germany added to jitters over the euro zone sovereign debt crisis.
Data showing manufacturing activity in Germany falling to the lowest level since April 2009 further weighed on sentiment.
During European morning trade, the EURO STOXX 50 fell 0.3%, France’s CAC 40 dropped 0.15%, while Germany’s DAX 30 shed 0.2%.
European equities opened mildly higher as investor sentiment found mild support following a report overnight showing that China’s HSBC purchasing managers index improved to 49.5 in July, its highest level since February, from a final reading of 48.2 in June.
While the index remained below the 50 level which indicates contraction, the improvement from the previous month eased concerns over a slowdown in the world’s second largest economy.
But markets turned lower after data from market research group Markit showed that its preliminary German manufacturing purchasing managers’ index fell to 43.3 in July from a final reading of 45.0 in June.
A separate report showed that manufacturing activity in the euro zone contracted at the fastest pace since May 2009 in July, adding to concerns over the region’s economic outlook.
Markets also remained jittery after ratings agency Moody’s revised its outlooks on the sovereign ratings of Germany, the Netherlands and Luxembourg to negative from stable after the U.S. market close Monday. Moody’s rates all three at AAA.
The ratings agency cited the possibility of Greece’s exit from the euro zone and the impact that would have on Spain and Italy.
Market players were also looking forward to a Spanish government debt auction later in the day, amid growing fears the country will be the next euro zone member to require a bailout.
The euro zone’s fourth largest economy was due to auction between EUR2-3 billion of three- and six-month government debt later in the day.
The yield on Spanish 10-year bonds rose to record-high 7.59% during early trade Tuesday, well above the 7% threshold widely considered unsustainable in the long term.
Shares in Spain’s largest lender Banco Santander lost 2.3%, while BBVA dropped 2.4%.
Italian lenders also contributed to losses, as the yield on Italian 10-year government debt rose to 6.43%, with Intesa Sanpaolo shares dropping 2.3%.
Elsewhere across the sector, France’s BNP Paribas and Societe Generale fell 2.6% and 1.1% respectively.
European technology firms were also lower after Texas Instruments, the world’s largest maker of analog chips, forecast third quarter sales and profit that came in below market expectations due to slackening demand for electronics from Europe.
STMicroelectronics lost 4.1%, while Infineon Technologies slumped 1.3%.
Elsewhere, in London, the FTSE 100 eased down 0.1%, as lenders tracked their European counterparts lower.
Royal Bank of Scotland shares fell 1.4%, Barclays slumped 1.2% and Lloyds Banking Group dropped 0.9%.
On the upside, Man Group saw shares rally 10.2% after it reported a pretax loss of USD164 million for the six month period to June 30, but added that it plans to make further cost savings of USD100 million over the next 18 months.
In the U.S., equity markets pointed to a broadly lower open, as investors focused on the euro zone’s debt woes while awaiting earnings from Apple after Tuesday’s closing bell.
While investors eagerly await Apple’s results, Wall Street will also be training its sights on United Parcel Service and Dow component AT&T, both due to report before the open Tuesday.
The Dow Jones Industrial Average futures pointed to a loss of 0.1%, S&P 500 futures signaled a decline of 0.15%, while the Nasdaq 100 futures indicated a drop of 0.15%.
Later in the day, the U.S. was also to release preliminary data on manufacturing activity, while Federal Reserve Chairman Ben Bernanke was to speak.
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