European shares wane as Moody's cuts Spain's rating

Europe's top shares edged lower early on Thursday with caution prevailing among investors as Moody's became the latest rating agency to downgrade Spain, ahead of an Italian bond auction later in the session and the Greek election over the weekend.

By 0702 GMT, the FTSEurofirst 300 was down 2.27 points, or 0.2 percent, at 984.89, having closed 0.3 percent lower on Wednesday in nervous trade as worries over global growth in the wake of the euro zone debt crisis crimped appetite for risk.

Moody's action, ahead of an Italian bond auction at which borrowing costs are seen sharply rising, saw Spain's rating cut by three notches to 'Baa3' from 'A3', while Cyprus was also knocked down, by two notches.

"Until there is more calm around Greece and Spain, one should just stay a bit on the sidelines and watch what will happen," Heinz-Gerd Sonnenschein, equity markets strategist at Deutsche Postbank, in Germany, said.

He said stocks are attractive on price-to-book and price-to-earnings levels but until a clearer picture is formed of what will happen in Greece and Spain investors are better off adopting a wait-and-see approach to investing.

With uncertainty swirling around equity markets, riskier banking and mining shares were among the top falling sectors on the index.