EUROPEAN shares edged lower on Wednesday as fresh worries over the US economy's "fiscal cliff", a combination of looming automatic spending cuts and tax hikes, hit the region's stock markets.
The pan-European FTSEurofirst 300 index, which rose 4pc last week, slipped 0.2pc to 1,105.44 points in early trade. The euro zone's blue-chip Euro STOXX 50 index also shed 0.2pc to 2,538.35 points.
U.S. Senate Majority Leader Harry Reid said on Tuesday he was disappointed there had been "little progress" among Democrat and Republican lawmakers as they try to reach a deal to avoid the year-end "fiscal cliff".
The term refers to $600 million in spending cuts and tax hikes that will be triggered if there is no agreement to stop them. It is feared they could derail the U.S. economic recovery, in turn hurting the global economy.
"It's just that one comment that is causing a slight storm in the tea cup. I think it's still a pretty resilient market out there, I don't see Europe following the U.S. by falling too far down," said McLaren Securities managing director Terry Torrison.
Many investors expect U.S. politicians eventually to reach a compromise to avoid any "fiscal cliff" hit, and Tavira Securities head of trading Toby Campbell-Gray also expected European equities to hold near their current levels.
"I would use any weakness in the equity market to put money in the market. The investment community largely knows about the fiscal cliff and the problems in the euro zone, and investors still want to buy this market," he said.
RAIFFEISEN AND VODAFONE FALL
Heavily weighted British telecoms group Vodafone took the most points off the FTSEurofirst 300 index, falling 0.8pc, which traders attributed to the effects of brokerage Berenberg cutting its rating on Vodafone to "hold" from "buy".
Austrian-based bank Raiffeisen was the worst-performing stock on the FTSEurofirst 300 index, falling by more than 5pc after the company said it expected bad loans to rise given the tough market conditions.
Many financial stocks have been hit by their exposure to the euro zone debt crisis, while Raiffeisen has been impacted by economic weakness in Hungary and south-eastern Europe.
Yet despite persistent worries over the weak global economy, European equities have held onto gains made since late July, when European Central Bank head Mario Draghi pledged to do "whatever it takes" to protect the euro currency.
The FTSEurofirst 300 remains up by around 10pc since late July, while the Euro STOXX 50 has risen around 13pc over that time.