Euro shares slammed on Moody\'s downgrade, weak ISM; DAX off 1.17%

Investing.com - European stocks closed lower  Tuesday, after Moody’s rating agency downgraded the outlook for the European Union’s credit rating and weak U.S. ISM numbers caused concern over global growth prospects.

At the close of  European trade, the EURO STOXX 50 fell 1.08%, France’s CAC 40 retreated 1.58%, while Germany’s DAX 30 plunged 1.17%.

Launching the negative equity sentiment, Moody’s placed the EU’s AAA credit rating on negative outlook, saying that its decision is in line with projections for the main budget contributors to the EU.

Germany, the Netherlands, France and the U.K. are all already on negative outlook.

 In the U.S., manufacturing activity in the U.S. contracted for the third consecutive month in August, adding to expectations the Federal Reserve will implement fresh stimulus measures to boost growth, industry data showed on Tuesday. 

In a report, the Institute for Supply Management said its index of purchasing managers fell by 0.2 points to 49.6 in August from a reading of 49.8 in July. 

Analysts had expected the ISM index of purchasing managers to ease up by 0.2 points to 50.0. 

On the index, a reading above 50.0 indicates industry expansion, below indicates contraction.

Sentiment remained mildly supported however, after ECB President Mario Draghi indicated on Monday that he would be comfortable buying bonds with maturities of up to about three years, saying that it would not constitute state financing.

At its policy meeting on Thursday, the ECB is expected to announce the details of a long awaited debt-buying program designed to help ease funding pressures for indebted euro zone countries.

Financial stocks remained mixed as shares in French lenders BNP Paribas and Societe Generale climbed 0.60% and 0.81% respectively, while Germany’s Deutsche Bank tumbled 1.34%.

Meanwhile, shares in German airline company Lufthansa extended earlier losses, plunging 1.53%, as flight attendants began strikes at two major German hubs earlier in the day. The Independent Flight Attendants Organization (UFO) trade union announced further action for the afternoon.

Auto makers also pushed lower, led by German group Volkswagen, down 2.89%, and closely followed by BMW, whose shares plunged 2.43%, while France’s Peugeot and Renault lost 1.17% and 1.62% respectively.

France’s car industry association reported earlier that sales tumbled 11% in August, posting a tenth monthly decline.

In London, FTSE 100 spiraled lower by 1.50%, as data indicated that U.K. construction activity contracted unexpectedly in August, as new orders fell at the sharpest rate since April 2009.

Vodafone led losses, with shares plummeting 2.25% after Sanford C. Bernstein & Co. downgraded the U.K. mobile-phone operator to “market perform” from “outperform”.

Elsewhere, mining stocks turned broadly lower. Shares in Rio Tinto tumbled 2.11% and BHP Billiton declined 1.20%, while Evraz saw shares sink 2.09%.

In the financial sector, stocks remained on the downside, as shares in the Royal Bank of Scotland plunged 1.28% and HSBC Holdings dropped 0.74%, while Lloyds Banking and Barclays declined 0.54% and 0.34%. 

Separately, a parliamentary report revealed earlier that the U.K.’s Financial Services Authority is preparing to investigate the computer failures that recently left some of the Royal Bank of Scotland’s 17 million customers unable to access their accounts.

In the U.S., equity markets traded sharply lower midsession with the Dow Jones Industrial Average down 0.74, the S&P 500 off 0.56% , while the tech heavy Nasdaq gave back 0.65%

In other news Tuesday, government data revealed the number of unemployed people in Spain rose by 38,200 in August, following a 27,800 decline the previous month.

Traders are anticipating the Canadian interest rate decision as well as Australian employment numbers on Wednesday.