European shares fall on downgrade worries

European shares ended lower on Friday after a choppy session, as multiple equity derivative contract expiries and fears of fresh corporate or sovereign credit rating downgrades over the weekend weighed on sentiment. The pan-European FTSEurofirst 300 index of top shares closed down 0.5 percent at 956.86 points near its day low of 956.40 having been as high as 968.58.
Technology stocks were the biggest sector fallers, with Nokia down 3.7 percent after Research In Motion posted a sharp drop in profit overnight and a bearish note from Exane BNP Paribas also weighed. Concerns about possible downgrades took hold going into the close in Europe as investors sold out of earlier gains. "Sentiment is very fragile today and the eurozone worries are impacting it," said IG Markets analyst Chris Beauchamp. "Anything can happen on the weekend and there concerns about possible downgrades. Investors are selling out."
After the market close in Europe, Fitch said it may downgrade France, Italy, and five other eurozone countries, due to the lack of a "comprehensive solution" to the region's debt crisis. Last week, S&P said it could cut the ratings of a series of eurozone sovereigns, including France and Germany. On the corporate front, Fitch on Thursday downgraded several large banks including Deutsche Bank, BNP Paribas, Credit Suisse and Goldman Sachs.
The FTSEurofirst 300 index made its worst weekly loss since the end of November, ending the week 2.9 percent lower as concerns about a plan to ease the euro zone debt crisis following an EU summit weighed on investors as well as the downgrade fears. The index ended below key resistance at its 38.2 percent Fibonacci retracement from its November to December rally at 959.5, which it was testing in the previous session. Next support was seen at the 50 percent retracement at 946.31.
Not all sector were in the red and miners were the best performing sector recovering from having been oversold earlier in the week as well as a rise in base and precious metal prices following Thursday's strong US economic data. The STOXX Europe 600 Basic Resources index was up 1 percent having fallen 5.7 percent earlier in the week.
The index ended the week down 4.3 percent, with fund managers saying that slowing growth in China could put further pressure on miners share prices. "Miners have had a sharp fall and have moved down to oversold levels, I thing investors are just bottom fishing and stabilisation of metal prices is supporting," Colin Mclean, managing director of SVM Asset Management, which has around $1.08 billion of assets under management. "We do not like the copper miners as they are geared toward China which is likely to soften."