LONDON: European stock markets retreated on Tuesday after a mixed session in Asia as Moody's Investors Service slapped Portugal with a new ratings downgrade, stoking fresh eurozone jitters.
London was also hit by a downbeat survey from the British Chambers of Commerce, whose quarterly poll of 6,000 businesses concluded that the nation's economy faces a choppy recovery this year.
In late morning trade, London's benchmark FTSE 100 index sank 0.39 percent to 5,993.41 points, the Paris CAC 40 dipped 0.64 percent to 4,017.17 points and Frankfurt's DAX 30 shed 0.38 percent to 7,148.24.
The Stoxx 50 index of leading eurozone companies declined 0.66 percent to 2,936.41 points.
"Another Moody's downgrade for Portuguese debt and a fairly downbeat outlook for the UK economy from the British Chambers of Commerce have set a cautious tone in early London trading," said IG Index sales trader Will Hedden.
Moody's Investors Service on Tuesday downgraded Portugal's ratings by a notch from A3 to Baa1 and warned that it expected the country to have to seek outside help to resolve its debt problems.
Moody's said its decision was "driven primarily by increased political, budgetary and economic uncertainty, which increase the risk that the government will be unable to achieve (its) ambitious deficit reduction targets" in the period 2011-2014.
The downgrade follows others by Moody's itself and the top ratings agencies after parliament rejected the government's latest austerity package last month, forcing its resignation.
The markets increasingly believe that Lisbon will be forced to seek outside help, like fellow eurozone strugglers Greece and Ireland last year, and are demanding ever higher rates of return to provide fresh funds to cover its debt.
Asian shares traded mixed in quiet trade on Tuesday as Tokyo was hurt by renewed fears over the crisis at the stricken Fukushima nuclear plant.
Tokyo's Nikkei slipped 1.06 percent to 9,615.55 points, while Sydney gained 0.27 percent, Seoul added 0.69 percent and Singapore rose 0.50 percent.
Australia said Tuesday that a planned Aus$8.4 billion ($8.9 billion) merger between the Australian and Singaporean bourses was against the national interest but was still considering the deal.
The ASX and Singapore Exchange Limited announced plans last October to create one of the world's largest and most diversified financial trading hubs.
But the proposal hit hurdles in Australia, where concerns over foreign ownership and Singapore's democratic and human rights record have been raised.
US stocks traded flat Monday as investors appeared to take a breather after last week's rally.
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