European stocks drop after Moody's downgrades

LONDON: Europe's stock markets dropped at the open on Tuesday after Moody's cut ratings on six European nations and placed three others including France and Britain on negative outlook due to the eurozone crisis.

In early trade, London's FTSE 100 dropped 0.24 percent to 5,891.76 points, Frankfurt's DAX 30 shed 0.38 percent to 6,712.68 and the Paris CAC 40 dipped 0.40 percent to 3,369.57 points.

In foreign exchange trading, the European single currency firmed to $1.3155.

Late on Monday, Moody's chopped the debt ratings of Italy, Spain and Portugal and put top Aaa rated France, Britain and Austria on warning, saying they were increasingly vulnerable to the eurozone crisis.

Austria, France and Britain were all put on negative outlooks a warning that if conditions worsen they could be hit with full downgrades.

"Moody's rating downgrades and negative outlooks for the UK and eurozone will likely dominate market sentiment first thing," said VTB Capital economist Neil MacKinnon.

"There are still plenty of uncertainties surrounding an early resolution of the Greek crisis too."

European equities rallied on Monday after Greek lawmakers approved disputed austerity measures that mark a key step to obtaining crucial European Union and International Monetary Fund aid for the debt-laden eurozone member.

"Moody's adjustment of sovereign debt ratings really took the shine off the positivity seen in the markets yesterday amid the news from Greece," said broker Owen Ireland at Valbury Capital.

"Almost all indices across the Asia pacific region were in the red and this negativity may well be seen in markets across the globe today."

Asian markets were mostly lower on Tuesday after Moody's action.

The move came after Greek lawmakers pushed a package of austerity cuts late Sunday, with Premier Lucas Papademos saying the measures were "the country's only hope" to avoid economic meltdown and secure another bailout.

European finance ministers will meet Wednesday in Brussels to sign off on the Greek deal necessary for a Europe-sponsored rescue package, followed by an offer to private sector holders to write-down by about a half their holdings of Greek government bonds.