Forexpros – European stock markets were broadly lower on Thursday, after ratings agency Moody’s warned that the U.S. may lose its top-notch credit rating and amid ongoing concerns over the region’s debt crisis.
During European morning trade, the EURO STOXX 50 declined 0.2%, France’s CAC 40 dipped 0.4%, while Germany’s DAX 30 edged 0.25% lower.
Late Wednesday, Moody’s Investors Service said that it placed the U.S. government’s Aaa bond rating on review for possible downgrade, citing “a small but rising risk” of a short-lived default, amid a standoff in the U.S. Congress over raising the country’s debt ceiling ahead of an August 2 deadline.
The rating would likely be reduced to the Aa range and there is no assurance Moody’s would return its top rating even if a default is quickly cured.
Meanwhile, Greece’s credit rating was cut three levels by ratings agency Fitch on Wednesday to CCC, its lowest grade for any country in the world, saying that a default was a “real possibility.”
Shares in the financial sector were mixed ahead of the European Union bank stress test results due Friday.
French lenders Societe Generale and Credit Agricole, which have large exposure to Greek and Italian debt declined 0.8% and 1.2% respectively. Spain’s second largest bank BBVA saw shares add 0.5%, while Italian banking giant Unicredit jumped 1.95%.
Italy was to auction up to EUR5 billion of long-term bonds later in the day in what will be a key test of market appetite for the country’s debt.
Meanwhile, shares in German software maker Software AG plunged 12.6% after it reported lower-than-expected earnings for the fiscal second quarter, citing a stronger euro and as software license sales weakened from the first quarter.
In London, the commodity-heavy FTSE 100 slumped 0.5% as shares in the oilfield-services sector performed poorly following a downgrade by Barclays.
Petrofac saw shares slide 2.5%, Technip shares dropped 1.9%, while shares in AMEC dipped 0.7%.
The outlook for U.S. equity markets was upbeat ahead of earnings reports from Wall Street investment bank JP Morgan and internet giant Google.
The Dow Jones Industrial Average futures pointed to a gain of 0.25%, S&P 500 futures rose 0.35%, while the Nasdaq 100 futures indicated an increase of 0.5%.
Later in the day, the U.S. was to release a string of economic data, beginning with a report on retail sales, producer price inflation, as well as weekly government data on initial jobless claims.
Also Thursday, Fed Chair Ben Bernanke was to deliver the second part of his testimony on monetary policy in Washington.
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