(RTTNews.com) - The European markets finished solidly in negative territory Wednesday, after the ECB made no change to its interest rate. Investors remain concerned over the political situation in the U.S., where a partial government shutdown has entered its second day. However, the Italian market rallied after Prime Minister Enrico Letta was victorious in a confidence vote. Former Prime Minister Silvio Berlusconi unexpectedly reversed his position and supported Letta, after withdrawing his support over the weekend.
The European Central Bank on Wednesday decided to hold fire on rates, as any tightening will be premature and dampen early signs of recovery in the region. The 23-member rate-setting council left the main refinancing rate unchanged at a record low 0.50 percent for the fifth month. The previous change in rate was in May, when it was lowered by a quarter point.
The bank held the marginal lending facility rate at 1 percent and the deposit rate was also left unchanged at zero.
European Central Bank President Mario Draghi said on Wednesday that the bank is prepared to use every available instrument to prevent market interest rates from rising to unsustainable levels that could hamper the economic recovery.
Underlying price pressures in the euro area are expected to remain subdued over the medium term, with inflation expectations remaining firmly anchored in line with the central bank's target of below, but close to, 2 percent, Draghi said in his introductory statement presented at the post-decision press conference in Paris.
Reiterating the ECB Governing Council's view that the key interest rates would remain at present or lower levels for an extended period of time, the policymaker attributed the expectation to the unchanged overall subdued outlook for inflation extending into the medium term.
Draghi cautioned that the risks surrounding the economic outlook for the euro area continue to be on the downside, mainly those from developments in global money and financial market conditions and related uncertainties.
The downward trend in unemployment in Eurozone member countries indicates that labor market conditions are improving gradually, Capital Economics European Economist Ben May said.
According to Capital Economics, since the labor market tends to react to changes in economic conditions with a bit of a lag, conditions may continue to improve over the coming months.
Germany's budget deficit in 2013 may come in lower than previously projected, a report from the Finance Ministry revealed Wednesday. The ministry expects the deficit to hit 0.2 percent of gross domestic product this year, less than 0.5 percent of GDP forecast previously.
British households injected record GBP 15.4 billion housing equity in the second quarter, the Bank of England reported Wednesday.
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.51 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.74 percent.
The DAX of Germany dropped by 0.69 percent and the CAC 40 of France fell by 0.92 percent. The FTSE 100 of the U.K. decreased by 0.35 percent and the SMI of Switzerland lost 1.17 percent.
In Frankfurt, Lufthansa declined by 3.48 percent. Deutsche Bank downgraded the stock to 'Hold'' from ''Buy.''
Basf fell by 0.08 percent. The chemical giant raised the long-term sales target for its Crop Protection division.
Deutsche Bank downgraded its rating on Air Berlin to ''Sell'' from ''Buy.'' The stock dropped by 2.86 percent.
Drug delivery devices maker Gerresheimer reported higher profit and revenue for the third quarter and backed its full year forecast. The stock increased by 1.80 percent.
In Paris, Danone decreased by 1.49 percent. New Zealand-based dairy exporter Fonterra confirmed that it is in a dispute resolution process with Danone, following the whey protein concentrate precautionary recall initiated in August.
In London, Tesco declined by 0.31 percent. The supermarket chain reported lower profit for the first half of the year, amid challenging economic conditions overseas, particularly in Europe.
J Sainsbury fell by 1.26 percent. The retailer said its total sales for the second quarter grew 5.0 percent, including fuel. On a like-for-like basis, quarterly sales went up 2.1 percent.
Unilever decreased by 1.57 percent. UBS downgraded the stock to ''Neutral'' from ''Buy.''
Dunelm Group sank by 4.97 percent, after its first-quarter like-for-like sales fell.
Barclays rose by 1.02 percent, after Societe Generale upgraded the stock to ''Buy'' from ''Hold.''
KappAhl dropped by 9.77 percent in Stockholm. The Swedish clothing retailer decided not to pay dividend for the financial year.
The number of unemployed in Spain increased in September from a month earlier, a report released by the labor ministry showed Wednesday. The number of registered unemployed rose by 25,572 from a month earlier to reach a total of 4.7 million. This compares with no change in August.
British construction sector growth eased unexpectedly in September, a survey by Markit Economics revealed Wednesday. The headline Markit/CIPS purchasing managers' index fell to 58.9 in September from a near six-year high of 59.1 in August. Economists had forecast the index to rise to 59.5.
In a report that may take on increased importance due to the likely delay of the government report, payroll processor ADP released a report on Wednesday showing that private sector employment in the U.S. increased by somewhat less than expected in the month of September.
ADP said the private sector added 166,000 jobs in September compared to a downwardly revised increase of 159,000 jobs in August. Economists had expected private sector employment to increase by about 180,000 jobs compared to the addition of 176,000 jobs originally reported for the previous month.
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