So far, 'limited' effects from negative rates, says ECB's Draghi
Most major European stock markets closed out a choppy session slightly lower, with investors staying on the sidelines ahead of the Federal Reserve minutes due later in the day.
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Dovish comments from European Central Bank President Mario Draghi did little to pull markets out of their narrow trading ranges.
Among benchmarks, Germany's DAX ended 0.1% lower at 12,642.87 and Italy's FTSE MIB declined 0.2% to 21,369.73. France's CAC 40 index fell 0.1% to 5,341.34.
However, the U.K.'s FTSE 100 rose 0.4% to 7,514.90 (http://www.marketwatch.com/story/mining-retail-shares-tug-ftse-100-slightly-into-the-red-2017-05-24), helping lift the Stoxx Europe 600 0.1% to close at 392.37.
"We have not seen any major moves today as dealers are waiting to see the minutes from the Federal Reserve meeting earlier this month," said David Madden, market analyst at CMC Markets, in a note.
"Investors will use the update to try to determine how likely the Federal Reserve is to increase interest rates next month," he added.
The minutes will be released at 7 p.m. London time, or 2 p.m. Eastern Time. Investors have largely priced in a rate hike by the Fed at its June 13-14 meeting.
Read:Fed minutes may quell doubt about a June interest-rate hike (http://www.marketwatch.com/story/fed-minutes-may-quell-fresh-doubts-about-a-june-rate-hike-2017-05-19)
China cut: Investors entered Wednesday's session with a downgrade of China's credit rating at Moody's for the first time in nearly 30 years (http://www.marketwatch.com/story/moodys-downgrades-china-rating-for-the-first-time-in-nearly-30-years-2017-05-24), to A1 from Aa3. Moody's cited concerns about the impact that rising levels of debt will have on the world's second-largest economy, which is a major buyer of industrial and precious metals.
Some mining shares were lower after the downgrade, but pared losses into the close, with Fresnillo PLC (FRES.LN) down 0.4% and iron ore heavyweight Rio Tinto PLC (RIO) (RIO) (RIO) off 0.5%. Boliden AB (BOL.SK) lost 0.3% and Norwegian aluminum company Norsk Hydro ASA (NHYDY) gave up 0.2%.
Investors have already been aware of China's credit-expansion issue, said Mark Williams, chief China economist at Capital Economics, in note.
"The greater concern, in our view, is not what the debt buildup is doing to government creditworthiness. Instead, it is that loose credit policies designed to prevent struggling firms from failing are eroding the economy's long-run growth potential by preventing resources from being allocated to areas where they could be used more efficiently," he wrote.
Central banks: There's been "an increasingly solid recovery" in the eurozone economy although underlying inflation pressures are still subdued, said Draghi at a speech in Madrid at Banco de España. Eurozone PMIs released Tuesday showed economic activity has remained at a six-year high.
But Draghi also said he doesn't see it necessary to change course on its policy direction, which includes an overnight deposit rate set at negative 0.4%. The ECB has said it could increase the size or lengthen the duration of its asset-buying program if inflation looks set to fall far back below its target of near but just below 2%.
"[I]n in a multicountry monetary union such as the euro area, made up of segmented national financial markets, asset purchases are inevitably more difficult to calibrate, more complex to implement, and more likely to produce side effects than other instruments, including moderately negative rates," Draghi said. "Negative rates may also have unwarranted side effects, but those have so far remained limited."
After Draghi's speech, the euro was buying $1.1174, up from $1.1184 late Tuesday in New York.
Stock movers: Daimler AG (DAI.XE) fell 1.6%, leading decliners on the DAX, after German authorities raided the company's Stuttgart headquarters (http://www.marketwatch.com/story/daimler-offices-raided-in-diesel-emissions-probe-2017-05-23)and other sites to secure evidence in their investigation in possible diesel-emissions fraud by the car maker. Prosecutors said on Tuesday the offices were raided.
Fiat Chrysler Automobiles NV (FCA.MI) (FCA.MI) fell 0.6%, with the car maker late Tuesday saying it was "disappointed" the U.S. Justice Department filed a complaint (http://www.marketwatch.com/story/fiat-chrysler-chafes-against-claims-of-diesel-emissions-cheat-shares-fall-2017-05-23) against the company related to allegations it used software to cheat diesel-emission tests.
Kingfisher PLC shares (KGF.LN) slumped 7% after the parent of home-improvement stores B&Q and Castorama said first-quarter comparable sales fell 0.6% (http://www.marketwatch.com/story/kingfisher-quarterly-same-store-sales-decline-2017-05-24) on weak sales in France and disruption caused by a company overhaul.
Shares of French aerospace supplier Safran SA (SAF.FR) and Zodiac Aerospace (ZC.FR) each remained halted after Safran said it cut its bid price (http://www.marketwatch.com/story/safran-cuts-offer-for-zodiac-aerospace-by-15-2017-05-24) for the plane cabin-interior specialist following Zodiac's profit warning.
(END) Dow Jones Newswires
May 24, 2017 12:11 ET (16:11 GMT)