European stocks slip on ratings cuts, US data

European stocks slipped on Tuesday following disappointing US retail sales data, having largely taken in stride a Moody's ratings cut on six European nations overnight due to the eurozone crisis.

Moody's also overnight placed on negative outlook three other countries, including France and Britain, but the main European markets were all in positive territory in midday trading.

However markets slipped after the US Commerce Department said January retail sales rose by 0.4 percent from December. While that was the biggest gain since October, the increase was only half as large as analysts expected.

In late afternoon trade London's FTSE 100 was down 0.26 percent to 5,890.61 points. Frankfurt's DAX 30 slid 0.25 percent to 6,721.54 points and the Paris CAC 40 dipped 0.21 percent to 3,377.59 points.

In foreign exchange deals, the European single currency slipped to $1.3150 from $1.3191 late on Monday in New York.

US stocks also slipped on opening, with the Dow Jones Industrial Average dipping 0.16 percent to 12,853.26 points after the first five minutes of trade.

The broad-based S&P 500 dropped 0.25 percent to 1,348.41 points, while the tech-heave Nasdaq Composite lost 0.30 percent to 2,922.59 points.

European shares had rallied on Monday after Greek lawmakers approved disputed austerity measures that mark a key step to obtaining crucial European Union and International Monetary Fund aid for the debt-laden eurozone member.

"Just as fears subsided on Monday, following the news on satisfactory austerity measures ratified by Greek parliament, another round of Moody's downgrades and outlook warnings for some of the EU countries took the wind out of the equities' sails," said trader Anita Paluch at Gekko Global Markets.

"This does not, however, come as a total surprise, as Moody's merely follows similar moves done already by S&P and Fitch last month.

"But Greece still remains in the background since the bailout still needs the EU approval and Germany and other nations are not entirely convinced the country could carry out all necessary actions as demanded by the creditors."

Overnight, Moody's chopped the debt ratings of Italy, Spain and Portugal and put top 'Aaa'-rated France, Britain and Austria on warning, arguing that they were increasingly vulnerable to the long-running eurozone crisis.

Austria, France and Britain were all put on negative outlooks -- a warning that if conditions worsen they could be hit with full downgrades.

"Moody's rating downgrades and negative outlooks for the UK and eurozone will likely dominate market sentiment first thing," said VTB Capital economist Neil MacKinnon.

"There are still plenty of uncertainties surrounding an early resolution of the Greek crisis too."

Asian markets were mostly lower on Tuesday after Moody's action.

The move came after Greek lawmakers pushed a package of austerity cuts late Sunday, with Premier Lucas Papademos saying the measures were "the country's only hope" to avoid economic meltdown and secure another bailout.

European finance ministers will meet Wednesday in Brussels to sign off on the Greek deal necessary for a Europe-sponsored rescue package, followed by an offer to private sector holders to write-down by about a half their holdings of Greek government bonds.

"Moody's adjustment of sovereign debt ratings really took the shine off the positivity seen in the markets yesterday amid the news from Greece," said broker Owen Ireland at Valbury Capital.

"Almost all indices across the Asia pacific region were in the red and this negativity may well be seen in markets across the globe today."

In Asian markets, Shanghai shed 0.30 percent, Seoul ended down 0.15 percent and Sydney closed 0.99 percent lower.

However, Tokyo clawed back early losses to close up 0.59 percent after the Bank of Japan said it was easing monetary policy by pumping an extra 10 trillion yen ($130 billion) into an asset purchase programme, aimed at battling the deflation that has wracked Japan's economy for years.

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