By Sruthi Shankar
(Reuters) -European shares tumbled to two-week lows on Wednesday, dragged by broad-based losses, as investors fled riskier assets after a surprise downgrade on U.S. credit rating by Fitch.
The pan-European STOXX 600 index fell 1.7%, touching its lowest level since July 18.
Rating agency Fitch on Tuesday downgraded U.S. debt rating, citing fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills.
U.S.
stock index futures slid about 1% though the dollar held steady and Treasury yields moved little on the news.
“If the negative in equities is linked to that, it’s a pure sentiment thing and not a rational move,” said Caroline Simmons, UK chief investment officer at UBS Global Wealth Management, pointing to a mild reaction in U.S.
bonds and the dollar.
“Most people are saying earnings are doing well, markets are doing well but we do expect a slowdown to come at some point, particularly in the U.S. where valuations are quite expensive.
So we will be sensitive to any potential negative newsflow.
Hopes of an end to the market-punishing interest rate hikes from major central banks and signs of a resilient U.S. economy had pushed European stock markets to multi-year highs earlier this week.
The German DAX, however, pulled back from record highs on Tuesday after weak factory activity data from across the globe raised concerns of an economic slowdown.
Among single stocks, U.S.-German medical device maker Siemens Healthineers dropped 7.3% after posting an unexpected drop in quarterly operating profit over diminishing COVID-19 test demand and delivery delays at cancer treatment specialist Varian.
JDE Peet’s NV slid 3.8% as one of the world’s largest coffee companies lowered its annual earnings target, saying it was unsure of the impact of a decision to stop selling its international brands in Russia.
German fashion house Hugo Boss slipped 1.9% even as it raised its full-year outlook.
“A good release, but the details might trigger some criticism, especially the higher working capital guidance,” Deutsche Bank analyst Michael Kuhn noted.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Sherry Jacob-Phillips and Dhanya Ann Thoppil)
