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

Euro rises with Draghi comments still in focus

European stocks ended with sharp losses on Thursday, as a rally by the euro reversed earlier optimism, hitting industrials, utilities and consumer shares.

Even as shares of European banks and basic materials companies rose, boosted by the outcome of U.S. bank stress tests and a weaker U.S. dollar, respectively, key regional benchmarks failed to follow them higher.

The Stoxx Europe 600 closed 1.3% lower at 380.66. Financials and basic materials were the best performing sectors, but the utility, industrials, consumer goods and services, and health care groups sold off.

Italy's FTSE MIB Index ended down 1.6% at 20,704, and Spain's IBEX 35 declined 1.6% to 10,530.

In Paris, the CAC 40 index sold off, ending 1.9% lower at 5,154. 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 fell 1.8% to 12,416, with investors watching a leap in the euro above $1.14. The shared currency is trading at its highest in more than a year.

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

"Even though we had good inflation figures from Germany today, the strength of the euro outweighed the positive sentiment in the country," wrote David Madden, market analyst at CMC Markets UK.

In London, the FTSE 100 finished modestly lower, down 0.5% at 7,350.

Miners: Gains for miners helped the London benchmark and the Stoxx Europe 600 Basic Resources index , which rose 1.5%. Those moves came as copper and some metals priced in dollar terms rose alongside a decline in the U.S. dollar , though gold and silver lost ground (http://www.marketwatch.com/story/gold-stages-a-retreat-as-government-bond-yields-jolt-higher-2017-06-29).

Copper miner Antofagasta PLC (ANTO.LN) tacked on 2.1% and Glencore PLC (GLEN.LN) rose 2.2%. ArcelorMittal (MT) declined 1.1%, and Norsk Hydro ASA (NHYDY) fell 0.7%.

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 rose 0.5%. 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 0.5%, Barclays PLC (BCS) rose 1%. HSBC Holdings PLC (HSBA.LN) was up 4.2%, benefiting also from a Morgan Stanley upgrade.

Stock movers: H&M AB (HM-B.SK) advanced 2.7% 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 8.4% 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 came in at 1.6%.

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 12:30 ET (16:30 GMT)