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Europe close: Stocks end mostly lower as investors mull Fed, banks slump

By Michele Maatouk

Date: Thursday 21 Mar 2019

Europe close: Stocks end mostly lower as investors mull Fed, banks slump

(Sharecast News) - European stocks ended Thursday's session mostly lower as investors digested a more dovish than expected policy announcement from the Fed, with banks under pressure.
The benchmark Stoxx 600 index ended flat at 380.69, France's CAC 40 finished 0.1% lower at 5,378.85 and Germany's DAX suffered the heaviest losses, closing down 0.5% at 11,549.96 as Deutsche Bank and Commerzbank slid.

Banks were under the cosh more generally, with the Stoxx 600 sub-index for the sector down 1.4% at 142.33.

On Wednesday, the US central bank stood pat on interest rates as expected, holding steady on its target of between 2.25% and 2.5%. More strikingly, the central bank also made it clear that no further increases in its interest rate targets would be delivered this year, given inflation was waning and economic growth was slowing.

Federal Open Markets Committee members continue to indicate they believe the balance sheet runoff will end by September, while also slashing their US economic growth estimate for the year to 2.1% from 2.3%.

FOMC members also agreed to take the shears to the Fed's personal consumption expenditure inflation forecast, dropping it to 1.8% from a previous 1.9%, while its core PCE estimate remained at 2%.

David Madden, market analyst at CMC Markets, said: "The dovish update from the Federal Reserve last night combined with the reduced growth outlook has put pressure on eurozone stocks."

He added that the downward revision to growth forecasts echoes the lowered growth forecast from the European Central Bank that was issued earlier this month.

In corporate news, cement maker HeidelbergCement was in the red after the release of its fourth-quarter results, as it said it expects a moderate rise in profit and revenue for the year.

Sweden's Skanska saw its shares fall after saying it does not expect to hit an operating margin target for its construction business this year or the next.

Eyewear giant EssilorLuxottica slumped amid in-fighting between the combined group's two bosses.

On the data front, the European Commission's advance consumer confidence index for the eurozone rose to -7.2 in March from -7.4 the month before, coming in a touch below consensus expectations of -7.1.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "A very modest rise, but for what's it's worth, it is also the fourth increase on the trot following the recently revised fall to, what now appears to have been a short-term low, of -8.3 in December.

"The overall level of confidence remains below the level observed for most of last year, but it appears that sentiment has turned the corner. Looser financial conditions, lower head inflation, and the ECB's pledge to keep rates low for longer all are helping, but these data don't point to a huge rebound in consumers' spending or retail sales growth."

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