European shares fell to a two-week closing low in thin volume on Wednesday as revived talk of a downgrade of France's sovereign rating added to concerns that the eurozone crisis will curb global growth. The pan-European FTSEurofirst 300 index of top shares closed 2.1 percent down at 952.42 points, after extending losses in the afternoon on trader talk that France, a key contributor to Europe's rescue fund, is set to lose its triple A rating, a development that could jeopardise the eurozone's efforts to stem its debt crisis.
"That rumour depressed the market and the late sell-off was a continuation of that," Giles Watts, head of equities at City Index, said. "There is almost a sense of inevitability about that (the French downgrade). Obviously low volumes exacerbated the moves." The FTSEurofirst 300 traded at 86 percent of its 90-day average volume as the approaching holiday season drove some investors out of the market.
In a bearish signal, the index fell below its 50-day moving average of 967.35, although further share price volatility was on the cards for the rest of this week ahead of a futures and options expiries on Friday, traders said. French lenders Societe Generale, BNP Paribas and Credit Agricole fell between 6.7 percent and 8 percent, underperforming the European banking sector, down 2.7 percent.
Adding to concerns over French banks' solidity, Credit Agricole said it would record a 2.5 billion loss this year, chiefly due to writedowns in its investment banking unit, and it would not pay a dividend in order to retain capital. France's CAC 40 was the worst performer among major European indexes, falling 3.3 percent, followed by Italy's FTSE MIB, which dropped 2.8 percent.
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