* FTSEurofirst 300 down 0.1 pct, FTSE MIB falls 0.6 pct
* French shares down on Moody's downgrade
* Fiat falls 4.9 percent on UBS rating cut
By Atul Prakash
LONDON, Nov 20 European shares ticked lower on
Tuesday, with French and Italian stocks underperforming after
Moody's cut France's credit rating and said Italy's banking
outlook remained negative, although losses were seen limited.
Italy's FTSE MIB fell 0.6 percent to lead weaker
regional stock indexes, pressured by financials, after Moody's
Moody's said the operating conditions for Italian banks were
difficult and would remain challenging.
The comments came after sources said the Bank of Italy had
told domestic lenders to make adequate provisions for rising bad
loans, resulting in a 1.6-2.9 percent fall in Banco Popolare
, UniCredit and BP Milano.
Investors also registered a knee-jerk reaction to Moody's
downgrade of France, the euro zone's second-biggest economy.
France's CAC 40 share index fell 0.2 percent, while EDF
, Bouygues and France Telecom fell
0.9 to 2 percent.
"Fundamental problems of the euro zone have not gone away
and there is no clear sign of a resolution. Until we get some
clear strategy, there are going to be ongoing problems," said
Oliver Wallin, investment director at Octopus Investments, which
manages nearly $5 billion.
"The weakest links in the chain are clearly Spain, Italy,
Greece, Cyprus and Portugal. At the moment, you can't disconnect
the banking sector from sovereign problems."
While France's downgrade had been expected and was largely
priced-in, analysts said the previous session's big gains - when
the FTSEurofirst 300 posted its biggest daily rise in
10 weeks - meant some were using it as a reason to take profits.
At 1214 GMT, the FTSEurofirst 300 was down 0.1 percent at
1,089.48 points after surging 2.3 percent on Monday. The euro
zone's blue chip Euro STOXX 50 index was down 0.1
percent at 2,492.31 points.
Technical analysts said that the Euro STOXX 50 was expected
to continue trading within its recent range of 2,426-2,581.
"Since peaking at 2,594 two months ago, the index has
recorded a sequence of descending tops and one would want to
see it back above its 50-day moving average, now at 2,512,
before suggesting the bottom is in," Bill McNamara, technical
analyst at Charles Stanley, said.
Cyclical shares, which generally react more to changes in
economic conditions, suffered the most, with the STOXX Europe
600 Banking index down 1.1 percent and the construction
sector 0.2 percent lower, retreating after Monday's
spike of 3.6 percent and 3 percent respectively.
Italian carmaker Fiat, down 4.9 percent, topped the
decliners' list on a wider sell-off after UBS cut its rating on
the stock to "neutral" from "buy".
Some analysts said that European shares had potential to
move higher in the coming sessions on expectations that U.S.
politicians would make progress in talks to avoid the so-called
"fiscal cliff" - $600 billion of tax rises and spending cuts
scheduled for early next year which threaten to tip the world's
biggest economy back into recession.
Investors also expected a positive outcome from a meeting of
the euro zone finance ministers on the release of bailout funds
to debt-ridden Greece, which approved laws on Monday to enforce
budget targets and ensure privatisation proceeds are used to pay
"We expect that by the year end, we will recover some of the
losses we made over the last month and start the new year
broadly in a positive trajectory," said Graham Bishop, senior
equity strategist at Exane BNP Paribas.
"We like industrials, media, business services and banks,
but don't like sectors such as food and beverages and luxury
On the positive side, travel and leisure shares topped the
gainers' list, helped by a 5.6 percent rise in easyJet,
which doubled its dividend after annual results.
"I'm still of the belief that on the back of a Greek and
'fiscal cliff' deal, we'll get a 5-10 percent rally in equities.
The question is how far do we fall before this rally happens,"
Mike Jarman, chief market strategist at H2O Markets, said.