European Markets Fall on Italian Downgrade, Slower Than Expected Data in China

“European stocks fell from a 4 1/2- year high as Fitch Ratings downgraded Italy and China’s retail sales and industrial output missed forecasts. U.S. index futures declined, while Asian shares rose…

“The downgrade in Italy will lead to some nervousness that more intervention will be needed, especially as it is clear that Cyprus also needs a bail out.” Felicity Smith, a London-basedfund manager at Bedlam Asset Management Plc, which manages about $500 million, wrote in an e-mail. “Ultimately,Germany will be the main contributor to the cost of this. I just see today’s downgrade as a bit of realism returning to the market, rather than a reason to panic.” …

The number of shares changing hands in companies listed on the Stoxx 600 was 29 percent lower than the 30-day average today, according to data compiled by Bloomberg.

Fitch cut Italy’s credit rating by one level after the close of equity markets on March 8, as last month’s election produced political paralysis that threatens the country’s ability to respond to a recession and the European debt crisis.

The rating company lowered Italy’s government bond rating to BBB+ from A- with a negative outlook. That’s three levels above junk and one higher than Spain, according to data compiled by Bloomberg.

“The Italian downgrade has taken some of the wind out of the market’s sails, reminding investors that the European situation remains largely unresolved,” Richard Hunter, head of U.K. equities at Hargreaves Lansdown Plc in London, wrote in an e-mail…..”

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