ECB may soon revisit monetary policy; Germany's GDP grows more than 2% in 2017
European stocks finished at their lowest in a week Thursday, as investors considered a signal from the European Central Bank that it's positioning for a more hawkish view on monetary policy.
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Retailers, meanwhile, struggled after the release of disappointing financial updates from the sector that included the key Christmas shopping period.
How did markets fare?
The Stoxx Europe 600 index fell 0.3% to 397.25, its weakest finish since Jan. 4 and a second straight loss, according to FactSet data. The telecom, tech and consumer-services sectors lost the most, but commodity-related and financial shares were top gainers. On Wednesday, the pan-European index fell 0.4% (http://www.marketwatch.com/story/dax-drops-1-as-european-stock-rally-pauses-but-bank-shares-rise-2018-01-10), pulling back from a 2 1/2 -year high.
Germany's DAX 30 index declined 0.6% to end at 13,202.90, and France's CAC 40 turned lower, finishing down by 0.3% at 5,488.55.
The U.K.'s FTSE 100 index logged a record close by rising 0.2% to 7,762.94. Spain's IBEX 35 edged up 0.1% to 10,435.20.
Read:These 5 charts are all 'flashing green' for more U.K. stock records (http://www.marketwatch.com/story/these-5-charts-are-all-flashing-green-for-more-uk-stock-records-2018-01-08)
The euro zoomed up to $1.2037 from $1.1949 late Wednesday in New York.
The yield for the 10-year German government bund turned higher, rising 4 basis points to 0.515%, according to Tradeweb. Yields rise when prices fall.
What drove markets?
Stocks pulled back while the euro leapt against major rivals after minutes from the ECB's December meeting (http://www.marketwatch.com/story/euro-spikes-higher-as-ecb-minutes-suggest-possible-hawkish-shift-toward-monetary-policy-2018-01-11) suggested policy makers may be poised to tweak their ultraloose monetary policy efforts, which have weighed on the shared currency.
"The language pertaining to various dimensions of the monetary policy stance and forward guidance could be revisited early in the coming year," according to the minutes.
Reconsideration could take place if the eurozone economy continues to expand and if inflation keeps rising toward the bank's target around 2%, the minutes said.
The ECB, led by President Mario Draghi, in December confirmed its plan to halve its quantitative easing program to EUR30 billion starting this month, and to let it run until the end of September 2018 or "beyond." The central bank meets next on Jan. 25.
Meanwhile, a number of retail stocks were punished after trading updates, including Danish jeweler Pandora A/S and Britain's Marks & Spencer PLC.
What strategists are saying?
"The upbeat minutes from the ECB has prompted traders to be fearful that their loose monetary policy may be reined in sooner than traders expected. The Bank of Japan trimmed their bond buying scheme this week, and dealers are a bit wary the ECB may not be a lax as they initially let on," said CMC Markets analyst David Madden in a note.
"[D]espite the Eurozone's increasingly brisk growth rate, the ECB is still deeply concerned about inflation and the stubbornly low pace of wage rises. So for all the hawkish nods and winks in today's minutes, the QE money presses are still expected to keep turning until September," said John Dolan, senior dealer at Fexco Corporate Payments, in a note.
"The euro has strengthened as markets adjust to this change of tone, and the stakes for Mario Draghi's next press conference have notched up as markets dare to hope that the ECB is finally ready to wean the eurozone economy off monetary stimulus," he said.
Stock movers: Pandora shares (PNDORA.KO) tumbled 10.7%, their worst session since August, according to FactSet. The Danish jeweler said in its preliminary 2017 financial update Thursday that revenue was "marginally below" its initial financial guidance of 23 billion to 24 billion Danish kroner. It also said its Ebitda margin is expected to be 37.3%, versus its full-year guidance of 38%.
"[S]everal external factors have worked against us during 2017, including a difficult U.S. retail climate as well as an unfavorable currency development," said Pandora CEO Anders Colding Friis in a statement.
Marks & Spencer PLC (MKS.LN) (MKS.LN) sank 7% after the British retailer and supermarket chain said like-for-like food sales declined (http://www.marketwatch.com/story/marks-spencer-food-sales-fall-at-christmas-2018-01-11) in the 13 weeks to Christmas.
Tesco PLC (TSCO.LN) (TSCO.LN) fell 4.3%. Britain's largest supermarket chain said it's confident in its outlook for fiscal 2018, after like-for-like U.K. sales rose 1.9% (http://www.marketwatch.com/story/tesco-sales-rise-at-christmas-2018-01-11) during the Christmas period. But slower sales of general merchandise and tobacco dragged on overall performance.
See: European stocks have been a "trendy" trade, but they now could finally break out (http://www.marketwatch.com/story/these-stocks-have-been-a-trendy-trade-but-they-now-could-finally-break-out-2018-01-08)
Richemont SA shares (CFR.EB) rose 0.6%, paring a larger gain. The Swiss owner of Cartier and other high-end jewelry brands said third-quarter revenue grew moderately (http://www.marketwatch.com/story/richemont-revenue-inches-up-but-short-of-outlook-2018-01-11), missing analyst forecasts.
SAP SE (SAP.XE) gave up 3.3% following a ratings downgrade by Morgan Stanley of the German software maker to equal-weight from overweight. "Our checks have been mixed for 4Q and we see some risk of a bump in the road for S/4 HANA [platform] migration," wrote analyst Adam Wood in a research note.
Shares of Hexagon AB (HEXA-B.SK) jumped 5.8% after reports late Wednesday said Ola Rollén, the chief executive of the Swedish industrial-technology company, had been acquitted on insider-trading charges related to an outside investment.
Economic data: Eurozone industrial production jumped 1% in November, compared with expectations for a rise of 0.8%, according to FactSet. Output was up 3.2% on the year, Eurostat said.
Germany's economy grew by 2.2% in 2017 (http://www.marketwatch.com/story/germans-2017-economic-growth-slows-more-than-seen-2018-01-11), according to a preliminary estimate from the country's Destatis agency. Economists polled by The Wall Street Journal projected slightly higher growth of 2.3%.
The Bank of France raised its fourth-quarter growth forecast to 0.6% (http://www.marketwatch.com/story/bank-of-france-hikes-4th-quarter-growth-forecast-2018-01-11) quarter-on-quarter from a previous forecast of 0.5%.
(END) Dow Jones Newswires
January 11, 2018 12:58 ET (17:58 GMT)