European shares fall after France credit downgrade

PARIS, Nov 8 (Reuters) - European stocks dropped in early trade on Friday, slipping from five-year highs hit in the previous session, as S&P's downgrade of France revived concerns over the health of the euro zone.

At 0805 GMT, the FTSEurofirst 300 index of top European shares was down 0.4 percent at 1,291.25 points, with France's CAC (Frankfurt: CB4.F - news) 40 falling 0.6 percent.

S&P lowered its long-term sovereign credit ratings on France by one notch to 'AA' from 'AA+'. It said high unemployment is weakening support for further significant fiscal and structural policy measures and that recent economic reforms will not substantially raise the country's growth prospects.

"S&P's decision reflects the worries over French growth, and the sentiment that government action is not enough," said Philippe Waechter, head of economic research at Natixis Asset Management in Paris.

"The French government sees the crisis as cyclical while S&P thinks the problems faced by the country are structural, and the credit agency sees the measures taken so far as insufficient."

French banking stocks featured among the biggest losers, with Societe Generale (Paris: FR0000130809 - news) down 1.3 percent and Natixis (Paris: FR0000120685 - news) down 1.2 percent.