European shares fell to a two-week low on Wednesday with broad losses as investors fled riskier assets after a surprise downgrade to US credit ratings by Fitch.
The pan-European STOXX 600 index fell 1.4%, its lowest level since July 18 and extending losses for a second day in a row.
Ratings agency Fitch on Tuesday downgraded the US debt rating, saying there were fears of a fiscal slippage over the next three years and that repeated down-to-the-wire debt ceiling talks would threaten the government’s ability to pay its bills. There is danger.
The downgrade shook global stock markets and sent euro zone bond yields lower as investors sought the relative safety of sovereign debt.
The Euro STOXX Volatility Index also hit a nine-week high, reflecting investor concern.
“The downgrade that began yesterday on weak economic data and concerns over the earnings outlook appears to have prompted more profit-taking,” said Michael Hewson, chief market analyst at CMC Markets.
European stock markets hit multi-year highs earlier this week on hopes of an end to market-damaging interest rate hikes by major central banks, even as data highlighting faltering global growth eased on Tuesday. put pressure on the equity.
“Most people are saying that earnings are doing well, markets are doing well but we expect a slowdown at some point, especially in the US where valuations are very expensive. So we will be sensitive to any potential negative news flow,” said Caroline Simmons, UK chief investment officer at UBS Global Wealth Management.
However, the German DAX retreated from record highs on Tuesday after weak factory activity data from around the world raised concerns of an economic slowdown.
In single shares, Telefónica Deutschland fell 17.9% to its lowest level since March 2020, as traders linked moves to rival Vodafone announcing a roaming deal with 1&1 in Germany.
US-German medical device maker Siemens Healthineers fell 5.6% after reporting an unexpected drop in quarterly operating profit.
The NV of JDE Peet, one of the world’s biggest coffee companies, fell 1.9% as it lowered its annual earnings target.
German fashion house Hugo Boss declined 1.9% despite raising its full-year outlook.
Nearly all major STOXX 600 sectors were lower, with retail stocks and miners down 2.6% and 2.7%, respectively.
The aerospace and defense index was a bright spot, rising 0.5%, boosted by a 6.4% rise in BAE Systems after the British defense firm upgraded its 2023 earnings forecast.
