European shares hit by euro zone, U.S. fiscal fears

LONDON Wed Nov 7, 2012 10:19pm IST

A woman looks at computer screens at Madrid's bourse August 2, 2012. REUTERS/Susana Vera

A woman looks at computer screens at Madrid's bourse August 2, 2012.

Credit: Reuters/Susana Vera

LONDON (Reuters) - European stocks fell sharply on Wednesday after persistent worries over the euro zone economy and fiscal problems in the United States eclipsed initial relief over U.S. President Barack Obama's re-election.

European stocks had rallied in morning trade and the FTSEurofirst 300 .FTEU3 hit a level not seen for nearly two months as Obama's win fuelled hopes the U.S. Federal Reserve would maintain its loose monetary policy.

But a fresh gloomy take on the outlook for the European economy, this time from the European Commission, which said the euro zone economy would barely grow next year, kick-started a long slide into the close for European indexes.

And while investors were relieved over Obama's win, they remained concerned about the U.S. "fiscal cliff" of about $600 billion in spending cuts and tax hikes set to begin early 2013, which could jeopardize growth.

"The fact that the election had gone swimmingly, there were no glitches, it was a clear winner," had helped markets open higher," Angus Campbell, head of market analysis at Capital Spreads, said.

"Then you get the downgrades to GDP for the euro zone and then you get the U.S. markets opening, and they're the ones that turned the focus onto the fiscal cliff and suddenly you get this huge sell-off."

The FTSEurofirst 300 .FTEU3 provisionally closed down 1.4 percent at 1,099.20, while on Wall Street all three major indexes were down around 2.5 percent.

($1 = 0.6257 British pounds) (Reporting by Tricia Wright; editing by Simon Jessop)

REUTERS SHOWCASE

Flying Back on Course

Flying Back on Course

The inside story of the new Airbus A350 jet  Full Article 

Oil Prices

Oil Prices

Oil rebounds above $62, tracking broader markets  Full Article 

Tracking Gold

Tracking Gold

Gold inches higher on weaker dollar, Asian buying  Full Article 

Cyber Attacks

Cyber Attacks

China condemns cyberattacks, but says no proof N.Korea hacked Sony  Full Article 

World Stocks

World Stocks

Oil and rouble rally into Christmas period  Full Article 

Connecting Markets

Connecting Markets

China stock connect scheme scorecard throws up surprises  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage