EUROPE MARKETS: European Stocks Step Lower, As Euro Rally Outweighs Gains For Banks, Miners

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Euro rises with Draghi comments still in focus

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Shares of European banks and basic materials companies rose Thursday, boosted by U.S. bank stress tests and a weaker U.S. dollar respectively, but key regional benchmarks failed to follow them higher.

The Stoxx Europe 600 slipped 0.1% to 385.31, giving up a gain of 0.5% at the open of trading. The financial and basic materials were the best performing sectors, but the utility, industrials, consumer goods and services, and health care groups struggled.

Pressure was coming from so-called peripheral markets. Italy's FTSE MIB Index was down 0.3% at 20,994.65, and Spain's IBEX 35 was off 0.2% at 10,684.30.

In Paris, the CAC 40 index was losing steam, flipping down 0.2% to 5,244.16. Decliners on the French benchmark included construction heavyweight Vinci SA (DG.FR) and conglomerate Bouygues SA (EN.FR) , as their shares lost 1.9% and 1.3%, respectively.

In Frankfurt, the export-heavy DAX 30 trimmed its gain to 0.1% at 12,662.13, with investors watching a leap in the euro above $1.14. The shared currency is trading at its highest in more than a year.

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A stronger euro can hurt sales of goods by European exporters as it makes the products more expensive for international buyers.

In London, the FTSE 100 was up 0.6% at 7,430.01 even as the pound approached $1.30 against the dollar.

Miners: Gains for miners helped the London benchmark and the Stoxx Europe 600 Basic Resources index , which rose 1.2%. Those moves came as copper and other metals priced in dollar terms rose alongside a decline in the U.S. dollar .

Copper miner Antofagasta PLC (ANTO.LN) tacked on 1.8% and Glencore PLC (GLEN.LN) rose 2.4%. On the industrial metals side, ArcelorMittal (MT) advanced 1.1%, and Norsk Hydro ASA (NHYDY) picked up 1%.

The dollar dropped against both the pound and the euro as those currencies were being repriced on comments from the heads of the Bank of England and the European Central Bank this week.

Read:BOE chief Carney hints at rate rise (http://www.marketwatch.com/story/boe-chief-carney-hints-at-rate-rise-2017-06-28)

And see:ECB's Draghi hints at winding down eurozone QE (http://www.marketwatch.com/story/ecbs-draghi-hints-at-winding-down-of-eurozone-qe-2017-06-27)

"Some ECB officials said that President Draghi's speech has been misinterpreted by the markets. Indeed, Mario Draghi has never mentioned any form of ECB stimulus unwind in his speech on Tuesday to trigger decent purchases in euro. Yet, Draghi's refusal to comment kept the euro-bulls on the field," wrote Ipek Ozkardeskaya, senior market analyst at London Capital Group.

"The truth is the euro's positive momentum was also and perhaps mainly due to the U.S. dollar depreciation, and the stop rally above the solid 1.13 resistance. For the moment, the softer [Federal Reserve] is enough to drive the euro higher against the U.S. dollar," she said.

The euro traded at $1.1424, up from $1.1379 late Wednesday in New York.

Banks: The Stoxx Europe 600 Banks index leapt 1.5%. The sector was lifted after the Federal Reserve on Wednesday said stress tests have determined the country's biggest banks have "strong" levels of capital and would be able to keep lending even during a severe recession. See:Fed stress tests show banks could withstand a deep downturn (http://www.marketwatch.com/story/fed-stress-tests-show-banks-could-withstand-a-deep-downturn-2017-06-22)

In the banking group, shares of Deutsche Bank AG (DBK.XE) climbed 2.2%, Societe Generale (GLE.FR) picked up 1.4%, and Barclays PLC (BCS) rose 1.5%. HSBC Holdings PLC (HSBA.LN) was up 4.8%, benefitting also from a Morgan Stanley upgrade.

Stock movers: H&M AB (HM-B.SK) advanced 1.3% after the Swedish apparel retailer posted a bigger-than-expected 10% rise in second-quarter profit (http://www.marketwatch.com/story/hm-surprises-with-10-jump-in-profit-2017-06-29).

DS Smith PLC (SMDS.LN) shares jumped 6.7% after the packaging company struck a deal to buy U.S. packaging and paper producer Indevco Management Resources Inc. for $920 million (http://www.marketwatch.com/story/ds-smith-profit-up-to-buy-control-of-indevco-2017-06-29). DS Smith also posted a 31% rise in fiscal 2017 pretax profit.

Economic docket: An initial reading of German inflation in June will be released at 1 p.m. London time.

German consumer confidence is set to continue its upward move (http://www.marketwatch.com/story/german-consumer-sentiment-set-to-rise-gfk-2017-06-29) in July, reflecting Germans' positive view of the economy and of their own finances, GfK market research group's monthly survey showed on Thursday.

(END) Dow Jones Newswires

June 29, 2017 05:12 ET (09:12 GMT)