LONDON (Reuters) - European shares and the euro fell on Tuesday after a credit rating agency stripped France of its top-notch rating, reminding investors of the continuing risks from the euro zone debt crisis.
But the falls were limited as the move was widely expected and comes a day after global equity markets saw their biggest gains since late July on optimism that U.S. lawmakers would reach a deal to avert automatic tax hikes and spending cuts due to take effect in early 2013.
The FTSEurofirst 300 index <.fteu3> of top European shares fell 0.4 percent to 1,087.69 points in early trade after surging 2.3 percent on Monday. The main French index, the CAC-40 <.fchi>, was also down 0.4 percent, while London's FTSE 100 <.ftse> and Frankfurt's DAX <.gdaxi> were flat to slightly lower. <.l><.eu/>
"(The France downgrade) is disappointing and an indication that core Europe is suffering a bit. But the market has been talking about this for a while," said Graham Bishop, senior equity strategist at Exane BNP Paribas.
Ratings agency Moody's stripped France of its triple-A badge on Monday, cutting the sovereign credit rating on Europe's No. 2 economy by one notch and leaving it with a negative outlook, citing an uncertain fiscal outlook and a deteriorating economy.
The move prompted only a moderate rise in safe-haven German bond prices, with the December bund futures contract up 12 ticks at 143.13.
The single currency dipped 0.25 percent from late U.S. trade on Monday to $1.2780, having risen to a near two-week high on Monday, on the signs of progress on resolving the U.S. fiscal crisis and optimism that Greece will receive much needed fresh funding.
On Greece, the market is awaiting the outcome of a euro zone finance ministers meeting in Brussels later that is expected to give a tentative go-ahead for the disbursement of 44 billion euros in emergency loans to Athens.
However, Finland's finance minister Jutta Urpilainen introduced a note of uncertainty on Tuesday, saying she was unsure whether the ministers would approve the next loan tranche for Athens at the meeting.
The ministers and the managing director of the International Monetary Fund, Christine Lagarde, are also due to discuss how to reduce Greek debt and provide two extra years of external financing to help the country achieve its fiscal targets.
The dollar steadied against a basket of key currencies <.dxy> and fell 0.2 percent against the yen to 81.23 yen, after the Bank of Japan, as expected, took no fresh action at the conclusion of its two-day policy meeting on Tuesday.
Brent crude held steady above $111 a barrel, less than a dollar away from a one-month high in the previous session, on hopes over the U.S. budget crisis and supply worries triggered by tensions in the Middle East.
U.S. crude futures eased 26 cents to $89.02.
Spot gold was nearly flat at $1,732.59 an ounce.
(Reporting by Richard Hubbard; Editing by Will Waterman)
European shares slide as euro zone worries resume
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European shares slide as euro zone worries resume
