Britain’s turn to worry markets over debt

Renewed worries about European sovereign debt, this time Britain's, knocked equities back on Tuesday and ate into early euro gains against the dollar.

Wall Street looked set for some gains at the start, but Europe's FTSEurofirst 300 was down 0.9 percent, giving up an early rise.

That pushed MSCI's all-country world stock index into negative territory, down 0.2 percent. The emerging market sector , hovering near a four-year low hit against the dollar on Monday.

It was up 0.4 percent against sterling at 0.8266 pence as the British currency was hit by Fitch's comments.

"There's been a big drop in equity markets and something of a rise in general volatility," said Peter Frank, currency strategist at Societe Generale.

Analysts said the euro gained support earlier in the day after euro zone ministers made final arrangements on Monday to set up funds for countries facing debt servicing problems.

A widening in peripheral euro zone bond yield spreads over their safe-haven German counterparts also weighed on the euro.