European shares fall on US concerns, Schneider hit by downgrade

Reuters

* FTSEurofirst 300 falls 0.4 pct, Euro STOXX 50 down 0.6 pct

* Schneider hit by Exane BNP Paribas downgrade

* U.S debt issues weigh on market in near-term

* Most investors see October equity dip as short-lived

By Sudip Kar-Gupta

LONDON, Oct 3 (Reuters) - European shares dipped on Thursdayas doubts over how the United States will resolve a budgetstandoff that has shut down parts of the government took theirtoll, while Schneider Electric was hit by a brokerdowngrade.

The euro zone's blue-chip Euro STOXX 50 index closed down by 0.6 percent at 2,902.12 points, while the broaderpan-European FTSEurofirst 300 index fell 0.4 percent to1,242.18 points.

A 3.2 percent fall at Schneider took the most points off theFTSEurofirst 300 index, as Exane BNP Paribas's downgrade to"neutral" from "outperform" hit the company's shares.

The FTSEurofirst 300 hit a fresh 5-year high of 1,274.59points in late September, while the Euro STOXX 50 hit a 2-yearhigh of 2,955.47 points.

Both markets have risen around 10 percent since the start of2013 but have slipped back in October after the U.S. governmenthad to partially shut down this week due to disagreement amongpoliticians over the country's budget.

The standoff is leading to concerns about the $16.7 trillionU.S. debt ceiling, which Treasury Secretary Jack Lew has saidthe government will hit no later than Oct. 17.

Darren Courtney-Cook, head of trading at Central MarketsInvestment Management, expected the uncertainty over the U.S.debt situation to weigh on markets this month.

He sold a position on Germany's DAX, which fell 0.4percent to 8,597.91 points, at 8,634 points on Thursday.

"I've been trading the range, buying the dip and selling thetop. But I'm looking to leave myself positioned 'short'," hesaid.

Others were more positive on a longer time frame, arguingthat in the past the United States had always managed to reachlast-minute solutions to raise its debt ceiling and that signsof a global economic recovery would continue to lift equities.

Economic data on Thursday showed a return to growth lastmonth for French and Italian companies, along with growth inBritain and Germany.

Threadneedle Investments chief investment officer MarkBurgess said his firm had raised its position on Europeanequities to "neutral" from "underweight".

Goldman Sachs economics analyst Noah Weisberger also feltany equity market dip caused by the U.S debt situation would berelatively short-lived.

"The current data, our forward views and a simple look backat past government shutdowns all suggest that current concernswill likely be short-lived," he said.

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