European Shares Fall As U.S. Debt Deal Remains Elusive

by
Reuters
European stocks fell on Wednesday, giving back some of the previous day's gains after U.S. politicians failed to agree a deal to avoid a default as the deadline neared.

European stocks fell on Wednesday, giving back some of the previous day's gains after U.S. politicians failed to agree a deal to avoid a default as the deadline neared.

The pan-European FTSE Eurofirst 300 fell 0.4 percent to 1,258.25, having gained 0.9 percent on Tuesday.

U.S. Senate leaders were still discussing a deal late on Tuesday aimed at raising the debt limit and reopening federal agencies that have been closed for two weeks. Senate aides said an agreement was close.

The FTSEurofirst had rallied on Tuesday after Senate leaders made optimistic noises that a deal would be done.

"Most people are likely to stay on the sidelines, and I'd look to sell into any rally. You have to be cautious because the situation is very volatile," Mike Harris, partner at TJM Partners, said.

"I would want to wait for a decision before getting more involved, although I do think it's likely that they force one through."

The risk of a U.S. default was reflected in credit ratings firm Fitch's decision to put the United States on "negative watch," citing the political brinkmanship over raising the federal debt ceiling.

Among Europe's top fallers were LVMH and Danone , down 5.6 percent and 4.9 percent respectively, after both French firms reported disappointing third-quarter sales.