(RTTNews.com) - The European markets finished in the red for a third consecutive session on Thursday. Investors remain cautious ahead of next week's Federal Reserve meeting. Speculation has been running high that the Fed will begin to taper its stimulus measures at the meeting. The larger than expected increase in U.S. weekly jobless claims this afternoon failed to ease those concerns. Investors were also disappointed by the weak Eurozone industrial production data.
European Central Bank President Mario Draghi on Thursday said government bond holdings of banks will also be examined in the planned stress test. Speaking at a plenary debate in the European Parliament, Draghi said sovereign debt is going to be treated like all other categories in the banks' balance sheet. The banker said he won't hesitate to fail lenders if needed.
The European Central Bank Executive Board member Benoit Coeure said he could not rule out further monetary easing. In an interview with German weekly magazine "Die Zeit," he said inflation is likely to move towards 2 percent over the medium term. "We are not giving a more precise time frame, but we are certainly not talking about a decade or a generation."
The central bank has a number of options. It can cut interest rates, move deposit rate into negative territory or provide additional liquidity to the banking sector, Coeure added.
The rules concerning the decision-making process on failed banks are complex, European Central Bank Executive Board member Joerg Asmussen told German daily Handelsblatt.
At a meeting held early this week, European finance ministers took one step further in finalizing an agreement on a joint mechanism to deal with failing bank.
Asmussen expressed concern over the compromise reached by ministers, as it may be too complicated to efficiently wind down insolvent banks.
The European Central Bank will act decisively again if downside risks materialize, ECB Executive Board member Peter Praet said in an interview to the Financial Times, published on Tuesday.
"If some of the downside risks do materialise, then - because price pressures are already weak today - we would act decisively again," Praet said. "This view is very strongly shared by the governing council members."
The interest rates are likely to remain at the present or lower levels for an extended period of time, European Central Bank Governing Council member Erkki Liikanen said Thursday. But the capacity of monetary policy has not been exhausted. "We are ready and able to act," he added.
Bank of England's forward guidance provided no effective large stimulus to the recovery, Monetary Policy Committee member Martin Weale said Wednesday. Mark Carney's flagship policy, introduced in August, implies that the central bank will not hike interest rate at least until the unemployment rate has fallen to a threshold of 7 percent.
The British Chambers of Commerce (BCC) on Thursday upgraded its growth forecasts for the U.K. economy and said household consumption will remain the main driver of growth. The BCC now projects the gross domestic product to grow 1.4 percent in 2013, up from its August forecast of 1.3 percent. The outlook for 2014 was raised to 2.7 percent from 2.2 percent.
At the same time, the industry group slightly revised down its predictions for 2015 to 2.4 percent from 2.5 percent.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.64 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.86 percent.
The DAX of Germany dropped by 0.66 percent and the CAC 40 of France fell by 0.43 percent. The FTSE 100 of the U.K. decreased by 0.96 percent and the SMI of Switzerland tumbled by 1.34 percent.
In Frankfurt, department store operator Metro gained 2.54 percent. The retailer posted a wider loss for the short financial year 2013 that spanned from January to September 2013, but said it expects a marked improvement in profitability in the new fiscal and sees a slight rise in overall sales.
In Paris, Peugeot sank by 7.61 percent. The carmaker said its annual results would include an impairment charge on Automotive Division assets, reflecting the impact of worsening automobile markets and unfavorable exchange rates in Russia and Latin America.
Technip fell by 2.56 percent. The oil services firm announced the extension of its long-standing agreement with British oil giant BP Plc. in the purified terephthalic acid domain.
Sanofi finished up by 0.54 percent. The drug-maker's animal health unit, Merial, said the European Medicines Agency approved Broadline, a product in the fight against external parasites offering additional internal parasite control for cats.
In London, Sports Direct International declined by 12.58 percent. The retailer reported a higher first-half profit, driven by about 24 percent growth in revenues and improved margins, but said that following the out-performance in the first half, trading has now reverted to management's original expectations.
EasyJet decreased by 1.89 percent, even after Goldman Sachs upgraded the stock to ''Conviction Buy List'' from ''Neutral.''
John Wood Group dropped by 9.91 percent, after it reduced the outlook for its engineering division.
Fortum increased by 2.43 percent in Helsinki. The company plans to sell its Finnish power-distribution business for 2.55 billion euros.
Nokia fell by 1.93 percent. Societe Generale downgraded the stock to ''Hold'' from ''Buy.''
Industrial production in the euro area decreased at a notably faster pace in October, defying expectations for a modest increase, with all the major industrial sectors recording decline in activity, latest data revealed Thursday.
Industrial production fell a seasonally adjusted 1.1 percent month-on-month in October, after dropping an upwardly revised 0.2 percent in the previous month, statistical office Eurostat said. Economists had forecast production to grow 0.3 percent, following September's originally reported 0.5 percent contraction.
France's EU harmonized inflation accelerated modestly in November, and matched economists' expectations, latest data revealed Thursday. The harmonized index of consumer prices (HICP) moved up 0.8 percent in November from a year earlier, which was faster than October's 0.7 percent gain, statistical office Insee said. Economists had forecast a 0.8 percent gain for November.
A leading indicator of the British economy increased for the fourth successive month in October, but at a weaker rate than in the previous month, pointing to moderate economic growth in early 2014, according to a survey conducted by the Conference Board. The leading economic index advanced 0.4 percent month-on-month to 108.4 in October, marking the fourth successive sequential increase.
Suggesting that the holiday shopping season began on an upbeat note, the Commerce Department released a report on Thursday showing that U.S. retail sales rose by slightly more than expected in the month of November.
The report said retail sales rose by 0.7 percent in November following an upwardly revised increase of 0.6 percent in October. Economists had expected sales to increase by about 0.6 percent compared to the 0.4 percent growth originally reported for the previous month.
After reporting a notable drop in first-time claims for U.S. unemployment benefits in the previous week, the Labor Department released a report on Thursday showing that initial jobless claims rebounded by much more than anticipated in the week ended December 7th.
The report said initial jobless claims jumped to 368,000, an increase of 68,000 from the previous week's revised figure of 300,000. Economists had been expecting claims to climb to 325,000 from the 298,000 originally reported for the previous week.
Import prices in the U.S. fell for the second consecutive month in November, according to a report released by the Labor Department on Thursday, with the decrease reflecting another sharp drop in prices for fuel imports.
The Labor Department said its import price index dropped by 0.6 percent in November, matching the revised decrease reported for October. Economists had expected import prices to fall by 0.8 percent.
Meanwhile, the report said export prices unexpectedly edged up by 0.1 percent in November after falling by 0.6 percent in the previous month. Export prices had been expected to fall by 0.3 percent.
Business inventories in the U.S. rose by much more than expected in the month of October, according to a report released by the Commerce Department on Thursday. The report said business inventories rose by 0.7 percent in October following a 0.6 percent increase in September. Economists had been expecting inventories to increase by a more modest 0.3 percent.
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