European stocks, euro dip as central banks dominate

Frankfurt (Dec 14)  European shares and the euro dipped on Thursday as cautious comments on inflation from the U.S. Federal Reserve gave investors pause before a series of central bank decisions in Europe.

The European Central Bank and the Bank of England are due to announce their final policy decisions of the year later in the day, with both expected to keep benchmark rates on hold.

Weakness in bank stocks contributed to a downbeat open in Europe, as the pan-European STOXX index fell almost 0.2 percent. The financial sector caught the cold from U.S. and Asian trading, which suffered from a less hawkish than expected tone from the Fed after it raised rates as expected on Wednesday and stuck to a projection for three hikes next year. Banks were the worst-performing sector in Europe as cautious comments from Fed Chair Janet Yellen on persistently low inflation rattled investors.

Surveys of purchasing managers indexes from Germany and the euro zone came in stronger than expected, but failed to boost the euro, which fell 0.1 percent in morning trade.

In a session packed with central bank decisions, the Norwegian crown rose over 1 percent against both the dollar and the euro after the central bank in Oslo brought forward its forecast for when rates might rise. The Swiss franc fell against the dollar and the euro after the Swiss National Bank maintained its ultra-loose monetary policy stance and said the local currency remained "highly valued".

Against a basket of currencies, the dollar was largely unchanged, still nursing a 0.8 percent loss in the wake of the Fed's decision. The Fed projected inflation to remain shy of its goal for another year, giving policymakers little reason to accelerate the expected pace of rate increases.

Reuters