By Sara Sjolin, MarketWatch
KAZUHIRO NOGI/AFP/Getty Images
European stocks ended firmly lower on Thursday, with minutes from the European Central Bank and Federal Reserve fueling fears among traders that the era of ultraloose monetary policy is coming to an end.
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP -0.57% fell 0.7% to close at 380.43, after notching a second straight day of gains on Wednesday.
Among top performers on Thursday, Associated British Foods PLC /zigman2/quotes/204493701/delayed UK:ABF -2.80% shares jumped 2.6% after the ingredient supplier and parent of fashion retailer Primark said its full-year outlook has improved.
Central bank selloff: More broadly, investors in Europe assessed the minutes from the June meeting of the U.S. Federal Open Market Committee, released after European markets closed on Wednesday, as well as minutes from the ECB’s June 8 meeting.
“Traders are sensing a shift in central banker’s policies. Last night the Federal Reserve revealed the minutes from the June meeting, and policy makers are divided over further interest rate hikes and the timing of when to begin reducing the balance sheet,” said David Madden, market analyst at CMC Markets, in a note.
“This division is adding to the uncertainty in the markets as traders can’t predict the Fed’s next move. Adding to that, the European Central Bank considered leaving out the promise to keep buying government bonds, and that contemplation alone, has spooked investors,” he added.
In the account from the June meeting, the ECB said it had discussed changing its easing bias , but decided “that prudence remained warranted.”
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.0575% rose after the ECB news, climbing to $1.1404, up from $1.1351 late Wednesday in New York.
Yields also advances on the prospect of tighter monetary policy, with borrowing costs on 10-year German paper /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -2.43% rising 9.7 basis points to 0.567%, according to electronics trading platform Tradeweb.
Bank rally: That helped banks to move higher, bucking the wider downbeat mood across Europe. The Stoxx Europe 600 Banks Index /zigman2/quotes/210599339/delayed XX:SX7P -1.86% climbed 0.7% to 188.15, its highest close since mid-May.
Shares of Commerzbank AG /zigman2/quotes/200193353/delayed DE:CBK -0.62% added 3.3%, UniCredit SpA /zigman2/quotes/200769686/delayed IT:UCG -3.20% gained 2.9% and Société Générale SA /zigman2/quotes/206663756/delayed FR:GLE -3.30% put on 1.7%.
Individual indexes: Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX -0.24% fell 0.6% to 12,381.25, while France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 -0.56% lost 0.5% at 5,152.40.
Stock movers: Shares of Sodexo SA /zigman2/quotes/206443022/delayed FR:SW -1.01% slid 6% after the facilities management company issued a sales warning after a weaker-than-expected third fiscal quarter.
Economic docket: German manufacturing orders rose 0.1% in May, missing forecasts of a 1.9% advance.