European shares fall after US downgrade

Mon Aug 8, 2011 7:17am GMT

LONDON (Reuters) - European shares slipped on Monday continuing their two-week slide after Standard & Poor cut the U.S. prized AAA credit rating by one notch, with miners the worst performers.

But losses could be limited after the Group of Seven leaders said they were "ready to take action to ensure stability and liquidity in financial markets" and the European Central Bank is to extend its bond buying support.

Commodity stocks whose performance is dependent on a strong economic outlook were among the worst performers, with the STOXX Europe 600 Basic Resources index down 1.7 percent.

"The downgrade to the U.S. is not great. These markets are going to remain unsettled for a while, we had recommended investors to raise cash in anticipation of this volatility," Mike Lenhoff, chief strategist at Brewin Dolphin Securities, said.

"If the ECB is going to provide some support to the bond markets that could create some sort of relief, buying opportunities could emerge in the sold off cyclical areas, but we are looking for more stability first."

By 0710 GMT, the pan-European FTSEurofirst 300 index of top shares was down 0.3 percent at 972.55 points, having hit their lowest level since late May 2010.

(sourced Thomson Reuters)