By Carla Mozee, MarketWatch
European stocks closed at their lowest in a week Thursday, with bank shares in the red, and they struggled throughout the session even after data showed eurozone business activity revved up this month.
The euro turned lower in the wake of the European Central Bank issuing updated inflation targets as policy makers wrapped up for the year.
How markets moved: The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP -3.67% fell 0.5% to 388.91, the weakest close since Dec. 7, according to FactSet data. No sector rose, and losses were led by the utility and consumer-goods groups. On Wednesday, the benchmark slipped 0.2%.
France’s CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 -4.75% dropped 0.8% to end at 5,357.14 and Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX -4.15% flopped down 0.4% to close at 13,068.08.
Spain’s IBEX 35 /zigman2/quotes/210597995/delayed XX:IBEX -4.96% lost 0.8% for a finish at 10,176.50. In London, the FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX -3.64% fell 0.7% for a closing at 7,448.12.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.9635% fell to $1.1784 from $1.1827 on Wednesday, when it leapt 0.7% against the greenback after the Federal Reserve suggested U.S. inflation will continue to be sluggish in 2018.
In the bond market, the yield on Germany’s 10-year government bond /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y -34.26% turned lower as prices rose. The yield fell less than 1 basis points to 0.304%, according to Tradeweb.
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What moved markets: The European Central Bank left its monetary policy unchanged, as widely anticipated. The euro began to drop following inflation projections from the ECB’s staff, as well as on renewed dollar strength.
The ECB’s 2020 inflation forecast of 1.7% was slightly behind some expectations of 1.8%, which could have suggested the bank would raised interest rates in the first half of 2019.
Banks, which can charge more for loans when interest rates rise, finished lower Thursday. The Stoxx Europe 600 Bank Index /zigman2/quotes/210599339/delayed XX:SX7P -6.88% dropped 0.8%, the most in a week. There, France’s Société Générale SA /zigman2/quotes/206663756/delayed FR:GLE -7.06% shed 1.2% and Germany’s Deutsche Bank AG /zigman2/quotes/205584254/delayed DE:DBK -6.35% fell 0.9%. Spain’s BBVA /zigman2/quotes/209653399/delayed ES:BBVA -7.34% gave up 0.8%.
The euro earlier Thursday had extended gains from Wednesday after figures showed strong factory output and an upturn in the services sector bolstered business activity in the eurozone in December.
Also Thursday, the Bank of England held its key rate at 0.5%, as expected. The Swiss National Bank left its deposit rate at minus 0.75%, and Norges Bank stood pat as well, but said it expects to lift rates “somewhat earlier” than it had expected in September.