Fitch cuts Portugal’s debt rating to junk status
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — European stocks turned lower on Thursday after comments from euro-zone officials took the shine off gains earned earlier from an unexpected rise in a gauge of German business confidence.
The Stoxx Europe 600 index XX:SXXP -0.31% fell 0.7% to 218.7 in afternoon trade after gaining through most of the session.
The index closed down 1.3% on Wednesday, its fifth consecutive loss following a disappointing German bond auction and a weak Chinese manufacturing survey.
U.S. markets are closed for the Thanksgiving Day holiday, placing even more of an emphasis on news out of Europe.
A strong run for Europe stocks was halted after French President Nicolas Sarkozy told reporters after a meeting with German Chancellor Angela Merkel and Italian Prime Minister Mario Monti that they respect the independence of the European Central Bank and won’t make demands on the institution as they try to tackle the sovereign debt crisis.
Merkel again criticized calls for the joint issuance of so-called euro bonds.
“The market had too high hopes going into the scheduled meeting of Sarkozy, Monti and Merkel,” said Steen Jakobsen, chief economist at Saxo Bank. “France is not in any position to put pressure on Merkel. The single biggest thing Sarkozy needs to do is not put pressure on [France’s] AAA rating ahead of the election.”
Earlier, European markets had gained after the Ifo Institute reported that its November index of German business confidence rose to 106.6 from 106.4 in October, compared to expectations for a fall to 105.1.
The German DAX 30 index DX:DAX -0.30% fell 0.9% to 5,407. The index fell 1.4% on Wednesday after Germany saw poor demand for its 10-year bonds at an auction.
Analysts had remained largely unconvinced about the strength of the day’s earlier gains.“It’s just a thin day as the U.S. is shut and there is a small bout of short covering,” said Stephen Pope, managing partner at Spotlight Ideas. “Do not think for one second that we are done on the downside.”
A downgrade for Portugal was taken mostly in stride. Fitch cut Portugal’s sovereign credit rating to junk status, to BB-plus from BBB-minus. The rating carries a negative outlook, meaning a further cut is possible.
Portugal’s PSI 20 index PT:PSI20 -0.29% fell 0.4% to 5,211.52. Trade unions in Portugal were staging a 24-hour strike to protest government austerity measures.
Banks attempt gains
Banks, which led the action throughout much of the day, pared gains in the afternoon, with shares of Commerzbank AG DE:CBK +3.64% up 2.8%. Deutsche Bank AG DE:DBK -0.06% DB -0.22% rose 1%.
The French CAC index FR:PX1 -0.04% was in flat territory at 2,823.04. Shares of BNP Paribas SA FR:BNP +6.45% gained 2.8% and Societe Generale SA FR:GLE +5.42% rose 1.8%.
