EUROPE MARKETS: European Stocks Drop To Lowest In Two Months On Growth Worries

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Pound falls ahead of BOE decision

Continue Reading Below

European stocks dropped to their lowest in nearly two months Thursday, rattled as investors questioned the U.S. Federal Reserve's outlook for monetary policy as signs of flagging consumer demand have cropped up.

The Stoxx Europe 600 fell 0.7% to 384.84, setting it on track for its weakest close since April 21, according to FactSet data. No sector moved higher, and telecom, consumer services and tech shares lost the most.

European investors on Thursday jumped out of so-called risk assets in the wake of soft U.S. economic data Wednesday and as oil prices remained under pressure on oversupply worries.

Meanwhile, eurozone finance ministers were set to talk with the International Monetary Fund about Greece's debt crisis.

Fed fallout: Before the Fed met widely held expectations of raising interest rates, weaker-than-expected U.S. retail sales were released Wednesday and data showed a decline in consumer-price inflation (http://www.marketwatch.com/story/inflation-falls-again-in-may-as-cpi-recedes-from-recent-high-water-mark-2017-06-14).

Continue Reading Below

Concerns about slowing in the U.S. economy, the world's largest, also showed up in the oil market following a smaller-than-expected decline in crude stockpiles. Gasoline stocks, meanwhile, increased just as the U.S. summer driving season is getting underway.

But Fed Chairwoman Janet Yellen late Wednesday indicated the central bank remains on course with its plans to raise borrowing costs and wind down its balance sheet.

"The key takeaway we got was that the Fed expects economic data (particularly inflation) to rebound soon and if so, it will proceed with its hiking plans. However, investors remain skeptical of further near-term hikes," said Charalambos Pissouros, senior analyst at IronFX, in a note.

"Market pricing suggests more than 50% probability that the Fed will not raise rates again this year. Therefore, moving forward, we expect market focus to be on incoming data and specifically, inflation-related figures," he said.

With the prospect of a slower pace of rate hikes, the Stoxx Europe 600 Banks Index was off 0.3%.

The euro traded at $1.1180, down from $1.1219 late Wednesday in New York.

Central bank updates: At 12 p.m. London time, 7 a.m. Eastern Time, the Bank of England delivers its latest policy decision. The central bank is widely expected to keep its key interest rate at a record low of 0.25%.

The pound traded at $1.2705 ahead of the announcement, down from $1.2753 late Wednesday in New York.

The Swiss National Bank on Thursday defended its oft-repeated claim that the Swiss franc is "significantly overvalued" on Thursday as it kept its key deposit rate (http://www.marketwatch.com/story/swiss-national-bank-keeps-key-rate-unchanged-2017-06-15) at minus 0.75%, where it has stood since early 2015.

Individual indexes: Germany's DAX 30 fell 0.6% to 12,728.88. France's CAC 40 retreated 0.8% to 5,202.84

The U.K.'s FTSE 100 fell 0.7% (http://www.marketwatch.com/story/ftse-100-drops-as-skepticism-over-fed-outlook-hits-risk-assets-2017-06-15) to 7,425.29.

(END) Dow Jones Newswires

June 15, 2017 06:35 ET (10:35 GMT)