European equities are set to open weaker on Thursday after U.S. stocks were whacked by fresh worries about more losses in the financial sector which overshadowed a cut in U.S. interest rates.
Speculation on financial television network CNBC that credit rating firms would downgrade Ambac Financial Group and MBIA pushed both down more than 10 percent, drowning out the cheers for Wednesday's 50 basis point interest rate cut by the U.S. Federal Reserve.
"The Fed continues to see weakening economic conditions as the predominant risk suggesting that additional rate cuts are possible," Asha Bangalore, an economist at Northern Trust, said in a note.
Standard & Poor's said it cut or may cut its ratings on hundreds of billions of dollars of U.S. mortgage-backed securites and collateralized debt obligations.
Major European indexes and are expected to open as much as 0.8 to 1.2 percent lower. The DJ Stoxx 600 index is limping towards its worst January on record, down more than 11 percent.
Markets will take their cue from a slew of results from companies including Royal Dutch Shell, AstraZeneca and Enel.