LONDON: European shares broke their three-day winning streak Thursday as banks fell following a set of cautious minutes from the U.S. Federal Reserve, while energy stocks also weighed on a busy day for company results. The pan-European STOXX 600 index fell 0.6 percent, while euro zone blue chips declined 0.7 percent. Britain’s FTSE 100 fell 0.6 percent, and Germany’s DAX dropped 0.5 percent.
Minutes from the Federal Reserve’s latest meeting showed policymakers were growing more cautious about recent weak inflation, with some calling for a pause in interest rate hikes. European banks, which benefit from higher interest rates, were the worst performing sector, down 1.6 percent with Deutsche Bank and Commerzbank leading the DAX lower with losses of 2.8 to 3 percent. Societe Generale, Credit Agricole and BNP Paribas were the top drags on France’s CAC, down 1.6 to 2.3 percent.
Minutes from last month’s European Central Bank meeting, which revealed some rate-setters were concerned about an excessive rise in the euro, sent the currency to a three-week low, briefly boosting the STOXX 600 into the black, though the index rapidly retreated again.
The euro’s recent rally has triggered concern about European stocks, many of which stand to lose from a stronger currency, though JP Morgan strategists have said investors may be overplaying its impact on earnings.
All eyes were turning to ECB chief Mario Draghi’s speech at the Jackson Hole central banker meeting next week. “Since the presentation in Sintra when he was much more dovish, the euro has increased a lot more, so we think we should get a dovish tilt from him,” said Ricardo Garcia, head of European macroeconomics at UBS Wealth Management’s chief investment office.
Energy stocks, the worst performing European sector so far this year, were also down 1 percent.
Earnings updates drove sharp moves, with Swiss toilet and plumbing supplies maker Geberit tumbling 5.8 percent after posting weaker-than-expected second quarter results.
Wienerberger plummeted 9.6 percent after the Austrian brickmaker flagged a bleaker outlook for the UK construction market, which accounts for 10 percent of its full-year outlook.
Drugmaker Hikma dropped 10 percent and Vestas Wind fell more than 7 percent after their updates.
Results boosted shares in Swiss health care firm Straumann to a record high, up 11.3 percent after its first half results beat expectations.
“We do not think anyone doubts Straumann’s revenue growth potential. The company is certainly living up to very high expectations in this regard having posted 14 percent organic growth in H1 2017, something those who can remember the dark days of 2010-12 can still scarcely believe,” analysts at Berenberg said in a note. They predicted attention would turn to Straumann’s margins and profits.
Danish hearing aid producer GN Store Nord was also up 6.3 percent after its second-quarter report.
So far 86 percent of MSCI Europe firms have given second-quarter updates, of which 60 percent have either met or beaten analysts’ expectations, according to Thomson Reuters data.