By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets moved broadly
lower in afternoon action on Thursday after strong U.S. growth data
stirred tapering fears and European Central Bank President Mario
Draghi signaled no further easing measures on tap.
The Stoxx Europe 600 index lost 0.9% to close at 314.41, marking
a fifth straight day in negative territory.
The U.K.'s FTSE 100 index gave up 0.2% to 6,498.33.
France's CAC 40 index fell 1.2% to 4,099.91, while Germany's DAX
30 index lost 0.6% to 9,084.95.
Banks weighed on all the indexes, with shares of BNP Paribas SA
down 1.7% in Paris, Deutsche Bank AG (DB) 1.7% off in Frankfurt and
Standard Chartered PLC 1.1% lower in London.
Shares of Metro AG fell 4.8% after Morgan Stanley cut the German
retailer to equal weight from overweight as the share price
breached the bank's price target earlier in the week and the
analysts "struggle to identify any near-term catalysts."
Sydbank AS lost 4.5% after the Danish bank said it would book
impairment charges of around 850 million Danish kroner ($155
million) in the fourth quarter.
Drax Group PLC rose 1.6% after J.P. Morgan Cazenove lifted the
utility firm to overweight from neutral.
Focus on the ECB
Investors digested the latest interest-rate decisions from two
of Europe's biggest central banks. The ECB left its key lending
rate at a record low of 0.25% and made no changes to other official
rates.
The central bank last month cut its lending rate by 25 basis
points in an effort to boost growth and stave off low inflation.
Since then, market participants have speculated whether the central
bank would launch unconventional easing measures such as
quantitative easing or negative deposit rates to further stimulate
the euro-zone economy.
ECB President Mario Draghi said at the afternoon news conference
that the Governing Council didn't identify any particular
instrument as a potential tool in case further action is needed,
although he emphasized that it is aware of the downside risks
implied by a protracted period of low inflation.
ECB staff cut the 2014 annual inflation forecast to 1.1% from an
earlier estimate of 1.3%, which was broadly expected. Draghi
stressed that the bank's forward guidance is working, offering
little reason to think the central bank is in a hurry to take
additional policy action.
"He didn't back away from further policy action, but he
certainly didn't hint that we should be prepared for another easing
announcement in the beginning of the new year. It's at least
several months away," said James Ashley, senior European economist
at RBC Capital Markets.
"When asked about the possibility of another round of [long-term
refinancing operations], he made it quite clear it would be a
different design. It wouldn't just be liquidity to banks this time,
but under the conditions they lend to the real economy, such as
nonfinancial corporations and households. This is an interesting
development because it's the first time since his
'do-whatever-it-takes' speech he has said something that would be
negative for peripheral debt," he added.
In the two previous rounds of LTROs, the banks widely used the
cheap funding to snap up sovereign debt from struggling nations
such as Italy and Spain, helping drive down the borrowing costs for
those nations to more sustainable levels.
No surprises in London
The Bank of England also offered no surprises at its December
policy meeting, leaving the size of its bond-buying program
unchanged and holding its lending rate at a record low of 0.5%,
where it has stood since March 2009. The central bank's monetary
policy committee left its asset purchases, the centerpiece of its
quantitative-easing strategy, at 375 billion pounds ($614
billion).
Also on Thursday, the U.K. Chancellor of the Exchequer George
Osborne delivered his Autumn Statement on the economy to members of
parliament, including the latest forecast from the Office for
Budget Responsibility. The OBR more than doubled its growth
forecast for the U.K. for 2013 to 1.4% from an earlier forecast of
0.6% and raised the outlook for 2014 to 2.4% from 1.8%.
Solid data out of the U.S. added pressure on stock markets in
afternoon action as they strengthened the case for the Federal
Reserve to taper its asset purchases. Third-quarter GDP expanded by
3.6%, better than the 3.2% expected by economists polled by
MarketWatch and up from an initial reading of 2.8%. U.S. stocks
traded lower for a fifth straight day.
Meanwhile, jobless claims dropped by 23,000 last week to
298,000, falling below 300,000 for only the second time since the
recession ended in 2009. The data came ahead of the all-important
nonfarm payrolls on Friday, which could add further fuel to the
tapering debate.
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