Shares tumble on fresh Moody's warning

Shares tumbled across Europe yesterday and in the US overnight after ratings agency Moody's disclosed fresh concerns over the European sovereign debt crisis and reiterated it would review the ratings of all 27 EU nations in the first quarter of next year.

Germany's Dax index lost 3.36% while the French Cac declined 2.61%.

In America, the Dow Jones fell sharply, losing 1.3%, while London's FTSE closed 1.83% lower on Monday. At one point yesterday, the Dow was down 243 points but recovered slightly in late trading.

Ratings agency Moody's said that last week's EU summit offered "few new measures" to deal with the debt crisis in the eurozone.

"The absence of measures to stabilise the credit markets over the short term means that the euro area, and the wider EU, remain prone to further shocks and the cohesion of the euro area under continued threat," the agency said in a statement.

Last week another ratings agency, Standard & Poor's, said it may downgrade the ratings of 15 of the 17 eurozone countries, including six with AAA status.

Responding to Moody's warning, French President Nicolas Sarkozy said that if France lost its AAA credit rating, it would be "one more difficulty, but not insurmountable".

"If they withdrew it, we would face the situation with sang-froid and calm," he told Le Monde newspaper.