EUROPE MARKETS: European Stocks Pull Back As Fed Rate-hike Doubts Hurt Bank Shares

By Carla Mozee and Sara Sjolin, MarketWatch Features Dow Jones Newswires

Vestas Wind, Hikma shares slammed

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European stocks broke a three-day winning run Thursday, with bank shares dragged down by doubts about another U.S. interest rate hike in 2017, while the euro came under further pressure following minutes from the European Central Bank's meeting last month.

The Stoxx Europe 600 index fell 0.6% to close at 376.87, led by losses for financial and oil-and-gas shares.

As trading got under way Thursday, attention was on the Federal Reserve as minutes from the central bank's July meeting -- released late Wednesday--raised the prospect the Fed may not raise interest rates again this year (http://www.marketwatch.com/story/some-fed-members-say-bank-can-be-patient-on-interest-rates-due-to-low-inflation-2017-08-16). The minutes showed officials engaged in an intense debate about the path of U.S. inflation after a run of unexpectedly low readings.

The Stoxx Europe 600 Bank Index dropped 1.7% -- the biggest one-day percentage drop since May -- on the dimmer rate-hike outlook, as many European banks have operations in the U.S. and higher rates can aid net interest margins. Among European lenders, shares of Deutsche Bank AG (DBK.XE) (DBK.XE) fell 3.2%, Banco Santander SA (SAN) (SAN) lost 2.5%.

Euro weakness: The euro continued to fall on Thursday after minutes from the ECB's meeting in July (http://www.marketwatch.com/story/ecb-considered-adjusting-forward-guidance-in-july-2017-08-17)showed policy makers discussed making a slight change to forward guidance about monetary policy but decided not to out of caution. The euro's rise in value also was a point of discussion last month.

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"[C]oncerns were expressed about the risk of the exchange rate overshooting in the future," according to the minutes.

Strength in the euro can make products from European companies more expensive to purchase for overseas clients. The euro hit an intraday low of $1.1662 after the minutes were released, but moved back to $1.1740. Late Wednesday, the shared currency bought $1.1768.

The minutes also indicated that the central bank believes underlying inflation hasn't yet "shown convincing signs of a pickup.Headline eurozone inflation for July was Thursday confirmed at 1.3% (http://ec.europa.eu/eurostat/documents/2995521/8140021/2-17082017-AP-EN.pdf/d12a740b-e9c1-4938-a83b-9bdf94f37d0e), unchanged compared with June.

Silent Draghi: There have been expectations the ECB will start winding down its aggressive monetary stimulus efforts as eurozone growth and inflation picked up earlier this year. Investors were eager to hear what ECB President Mario Draghi would say about that when he appears at the Fed's symposium in Jackson Hole, Wyo., next week.

But a Reuters report on Wednesday (https://uk.reuters.com/article/uk-ecb-policy-draghi-idUKKCN1AW0LL), citing ECB sources, said Draghi wouldn't deliver any new policy messages at the conference.

"At the latest ECB meeting, [Draghi] clearly stated that a discussion on tweaks to QE should take place in the 'autumn,' suggesting we are likely to get some signals on stimulus changes either in September or October," said Marios Hadjikyriacos, research analyst at IronFX, in a note.

"Although a lot will depend on incoming data, we maintain our view that a likely scenario is that the bank removes its QE easing bias at the September meeting, thereby laying the groundwork for a formal announcement in October that the pace of QE purchases may be reduced by the turn of the year," he wrote.

Read:ECB hints at no hawkish shift at Jackson Hole (http://www.marketwatch.com/story/euro-slides-after-ecb-hints-at-no-hawkish-shift-at-jackson-hole-2017-08-16)

Also read:The pound is 'extremely undervalued' right now, according to UBS (http://www.marketwatch.com/story/the-pound-is-extremely-undervalued-right-now-according-to-ubs-2017-08-16)

Stock movers: Vestas Wind Systems A/S sank 8% after second-quarter earnings at the Danish wind-turbine maker missed expectations (http://www.marketwatch.com/story/vestas-earnings-miss-forecasts-to-buy-back-shares-2017-08-17). The company did said it is launching a new share buyback program.

Hikma Pharmaceuticals PLC (HIK.LN) tumbled 10.5% after the company lowered its revenue guidance (http://www.marketwatch.com/story/hikma-sees-tough-competition-in-generics-market-2017-08-17) in expectation of tougher competition facing its generics division.

Novo Nordisk A/S (NOVO-B.KO) (NOVO-B.KO) rose 2.1% after the company said its semaglutide treatment for diabetes in a late-stage clinical trial met its primary endpoint of cutting down glucose levels.

Indexes: Germany's DAX 30 index ended down 0.5% at 12,203.46 and France's CAC 40 index fell 0.6% to 5,146.85. The U.K.'s FTSE 100 index dropped 0.6% to 7,387.87.

Spain's IBEX 35 index closed down 1% at 10,443.80. Late in Thursday's trading session a truck crashed into several people (http://www.marketwatch.com/story/vehicle-strikes-pedestrians-in-central-barcelona-reports-2017-08-17) in the busy Las Ramblas district in Barcelona.

(END) Dow Jones Newswires

August 17, 2017 12:09 ET (16:09 GMT)