Pound gains following hawkish dissent at BOE
European stocks finished at their lowest level 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 0.4% to end at 386.05, suffering its lowest close since April 21, according to FactSet data.
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.
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).
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 supplies, meanwhile, increased just as the U.S. summer driving season is getting under way.
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 increases, the Stoxx Europe 600 Banks Index traded in negative territory for most of the session. But it managed to rally into the close, finishing 0.2% higher.
The euro traded at $1.1158, down from $1.1219 late Wednesday in New York.
Other central bank updates: Investors also weighed divided views about interest rates at the Bank of England, as the BOE voted 5-3 to hold its key interest rate at 0.25% (http://www.marketwatch.com/story/bank-of-england-holds-key-rate-at-025-with-3-policy-makers-voting-for-a-hike-2017-06-15). Analysts had widely expected one Monetary Policy Committee member--at the most--to seek a rate increase.
The pound recently traded at $1.2767, up from $1.2753 late Wednesday in New York, but down from an intraday high just shy of $1.28 that came after the BOE news.
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 0.9% to finish at 12,691.81, while France's CAC 40 retreated 0.5% to end at 5,216.88.
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 close at 7,419.36.
(END) Dow Jones Newswires
June 15, 2017 12:06 ET (16:06 GMT)