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)

Economic Pulse

REUTERS SHOWCASE

Banking Sector

Banking Sector

India's laggard state lenders face tough sell on capital raising plan  Full Article 

Falling Oil Prices

Falling Oil Prices

Saudis signal no push for oil cut as market to "stabilise itself"  Full Article 

Raising Stake

Raising Stake

Nippon Life to raise stake in Reliance Capital fund unit  Full Article 

Sterilisation Camps

Sterilisation Camps

Sterilisation targets remain in all but name, critics say  Full Article 

Share Buyback

Share Buyback

Samsung Electronics to buy back $2 billion in shares  Full Article 

Bird Flu Scare

Bird Flu Scare

India orders culling after bird flu outbreaks in Kerala.  Full Article 

Microsoft in China

Microsoft in China

Microsoft to pay China $140 million for 'tax evasion'   Full Article 

Flashback: 26/11

Flashback: 26/11

The three-day attack in November 2008 left 166 dead.  Slideshow 

Reuters India Mobile

Reuters India Mobile

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