REFILE-European shares lower, France's CAC lags post downgrade

Tue Nov 20, 2012 3:42am EST

LONDON Nov 20 (Reuters) - European shares edged lower on Tuesday, with the French CAC a core euro zone laggard after ratings agency Moody's issued a long-awaited downgrade of France's credit rating.

The cut was largely in the price, however, analysts said, adding that the previous session's sharp gains - when the FTSEurofirst 300 posted its biggest daily gain in 10 weeks - meant some were using it as a reason to take profits.

At 0811 GMT, France's CAC 40 was down 0.5 percent, while the FTSEurofirst 300 index was 0.3 percent lower at 1,088.66 points. It had surged 2.3 percent on Monday.

"It (the France downgrade) is disappointing and an indication that core Europe is suffering a bit. But the market has been talking about this for a while. It's just a knee-jerk reaction, and not a game changer," Graham Bishop, senior equity strategist at Exane BNP Paribas, said.

"We expect that by the year end, we will recover some of the losses we made over the last month and start the new year broadly in a positive trajectory. We like industrials, media, business services and banks, but don't like sectors such as food and beverages and luxury goods."

Moody's Investors Service downgraded France's sovereign rating by one notch to Aa1 from triple-A after the market close on Monday, citing the country's uncertain fiscal outlook as a result of its weakening economy. It followed a cut by peer Standard & Poor's in January and was widely expected.

Cyclical shares suffered, with banks down 0.9 percent and autos falling 0.6 percent.

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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