Global fears keep a lid on European stocks
Rising political tension in Egypt, weak China growth and the resurfacing of debt worries in Europe were all enough to suppress European equities early today.
The FTSEurofirst 300 fell 13.27 points, or 1.2pc to 1145.50, by 0728 GMT, echoing weakness overnight in Asia, with miners falling 1.2pc after data revealed China's manufacturing growth hit multi-month lows in June.
Appetite for shares was further dented by concerns that turmoil in Egypt could destabilise the Middle East.
The Euro STOXX 50 fell 1.9pc to 2,554.17 points having failed to break above the 200-day moving average and ploughing through short-term support around 2,588 points.
Bond yields in Europe's peripheral countries were rising too as political problems in the euro zone nations continued to generate nerves.
Portugal's prime minister refused to accept the resignation of his foreign minister yesterday, raising the stakes in a political crisis that could derail Lisbon's plan to exit an international bailout.
Portugal's stock exchange shed 6pc.
Meanwhile, nervousness over the state of Greece's next tranche of bail-out money also caused minor tremors among investors in the banks and insurers, which fell 1.7pc and 1.3pc, respectively.
"With disorder and uncertainty over the political situation in Egypt threatening stability in the Middle East, and a Greek deadline looming to prove it can action its bail-out conditions before receiving the next tranche of aid, volatility is likely to be high," Mark Ward, head of trading at Sanlam Securities, said.
S&P ratings added to the investor angst towards the banks.
It took the knife to ratings for Barclays, Deutsche Bank and Credit Suisse overnight, cutting all three to A from A-plus, citing uncertainties over the outlook of European investment banking models, increasing regulator risk together with uncertain market conditions going forward.
Standout performers on the upside included oil services firm Tenaris which rallied 12.6pc, with traders citing talk of a positive ruling in anti-dumping case.
Africa-focused Tullow Oil climbed 2.6pc after it hailed a "very successful" exploration programme in frontier oil country Kenya.
And chip designer ARM Holdings added 1.7pc after UBS upgraded its recommendation to "buy" and added to its key call list on valuation grounds, having fallen 30pc from its May peak on earnings worries.