European shares fall on U.S. debt default concerns

European shares fell on Monday, July 25 from their highest in more than a week in the previous session as investors cut riskier assets on the possibility of a first-ever U.S. debt default after talks between Democrats and Republicans again collapsed.


At 0704 GMT, the FTSEurofirst 300 index of top European shares was down 0.6 percent at 1,102.33 points after closing 0.5 percent higher on Friday.

U.S. President Barack Obama and congressional leaders have tried to reassure global markets that the country will be able to service its debt and meet other obligations after Aug. 2, when the Treasury Department will have exhausted its reserves.

"The markets were hopeful that by now something would have been agreed. I don't think a U.S. debt default has been completely ruled out by the markets," said Keith Bowman, equity analyst at Hargreaves Lansdown.
"At the end of the day, there is a huge amount of politics being played out. Investors are anxious to see some sort of agreement finalised. The results season has been a little bit better than a lot of people thought, but we would certainly like to see the U.S. debt situation put behind us."

A Moody's downgrade of Greece's sovereign debt ratings by three notches also hurt sentiment. The ratings agency said the country still faced serious medium term solvency challenges despite the fresh bailout package.
Financial stocks were among the top losers, with the STOXX Europe 600 banking index falling 1.3 percent.

Dexia fell 5.4 percent, while UniCredit dropped 4.5 percent.(Reuters)