By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets traded broadly
lower on Wednesday as the government shutdown in the U.S. moved
into day two and investors awaited the latest policy decision from
the European Central Bank.
The Stoxx Europe 600 index dropped 0.8% to 310.56, erasing a
0.8% gain from Tuesday.
Shares of Tesco PLC (TSCDY) gave up 3.3% after the supermarket
chain reported a drop in first-half net profit as it is struggling
to regain footing in the U.K. and faces sales declines in
international markets.
Shares of Unilever PLC (UL) lost 1.6% after UBS cut the
consumer-products firm to neutral from buy, with the analysts
citing slowing demands in emerging markets on top of currency
weakness.
"Whilst this does not invalidate the long term structural EM
growth story, perhaps the market needs to revisit the growth
algorithm one should apply. With Unilever positioning itself as
'the' emerging market company it will unavoidably find itself in
the middle of this debate," the analysts said.
More broadly, political uncertainty was on the agenda in both
Italy and the U.S. and hampered the trading sentiment in Europe. In
Italy, Prime Minister Enrico Letta prepared to hold a vote of
confidence in efforts to save the government after five ministers
of Silvio Berlusconi's People of Freedom party resigned over the
weekend.
Letta should win the confidence vote in the Chamber of Deputies,
but is expected to struggle for support in the Senate, analysts at
Société Générale said in a note. In recent days, however,
Berlusconi has lost backing from some party members and deputy and
party secretary Angelino Alfano said on Tuesday that members of the
party should back Letta, according to media reports.
In the U.S., the government shutdown moved into a second day as
law makers still didn't agree on a budget for the fiscal year,
which started on Tuesday. Investors are growing increasingly
worried that the impasse will go on longer than expected and may
impact negotiations to raise the debt-ceiling in mid-October.
U.S. stock futures moved sharply lower.
Later in the day attention turns to the European Central Bank,
which will announce its latest policy decision at 12:45 p.m. London
time, or 7:45 a.m. Eastern Time, followed by ECB President Mario
Draghi's news conference at 13:30 p.m. Analysts expect to keep the
interest rate at a record low 0.5%. Read: ECB preview: European,
U.S. politicians make life difficult for Mario Draghi
Among country-specific indexes in Europe, France's CAC 40 index
lost 0.9% to 4,158.97, while Germany's DAX 30 index gave up 0.6% to
8,641.19. The U.K.'s FTSE 100 index erased 0.9% to 6,400.24.
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