European markets have been at their highest levels this week in more than a year but Thursday was clearly a day to bank profits ahead of the outcome of the meeting of the US Federal Reserve's policy-making committee.
The Federal Open Market Committee (FOMC) will conclude its two-day meeting and announce a monetary policy decision, followed shortly by a press conference from Fed president Ben Bernanke.
Most analysts are expecting the Fed to take action, whether through a new round of quantitative easing (QE), the extension of its low-rate policy until 2015, or both.
Banks led the retreat with Deutsche Bank and Commerzbank the worst performers in in Frankfurt, while Societe Generale and Credit Agricole were sharply lower in Paris. In Spain, Banco Santander and BBVA fared better than their French and German counterparts.
Airbus owner EADS led the fallers in France after Barclays suggested investors pare their holdings in the wake of yesterday's news about a possible tie-up with UK defence firm BAE Systems, while Deutsche Bank downgraded the stock to "hold" from "buy".
BAE also took a buffeting, as Oriel Securities cut its recommendation to "hold" from "buy".
In other broker action, building firm Vinci was cut to "neutral" from "buy" by Bank of America, but Zodiac Aerospace gained altitude after Societe Generale upgraded it from "sell" to "hold".
On the commodity markets, the front month contract for Brent Crude was up 47 cents to $116.43 a barrel, while gold was in favour, with the most widely traded contract up $2 to $1,735.70 an ounce.
In the Netherlands, Prime Minister Mark Rutte's VVD party appears to have secured the most seats, by a whisker; the VVD party is projected to win 41 seats, while the centre-left PvdA party is forecast win 39 seats in the 150-seat lower chamber of the Netherlands' parliament.
"Although VVD leans more toward the right wing and PvdA toward the left, we nevertheless consider these two parties sufficiently close to be able to build a ruling coalition," stated Francois Cabau of Barclays.
"They could further strengthen the future ruling coalition by accepting other parties, such as D66 and the Christian Democrats, allowing them to control the Upper House as well," Cabau added.
A confirmed win by the VVD party would likely be a welcome outcome for markets, Cabau reckons, "given the party's commitment to bringing the general government public deficit to GDP [gross domestic product] ratio within the Maastricht criteria by next year.
"While the labour party is fundamentally pro-European also, it had not made such an explicit commitment in its manifesto; however, we expect it would follow suit with the VVD on that front," Cabau opined.
DAX - Risers
Merck € 95.51 +1.25%
Henkel € 62.23 +0.86%
Beiersdorf € 56.77 +0.75%
DAX - Fallers
Deutsche Bank € 32.22 -2.36%
Commerzbank € 1.55 -1.78%
HeidelbergCement € 42.94 -1.22%
CAC 40 - Risers
ST Microelectronics (STM) € 4.92 +1.44%
Publicis Groupe Sa (PUB) € 44.11 +1.05%
Alcatel-Lucent (ALU) € 0.96 +0.84%
L'Oreal (OR) € 97.73 +0.75%
Michelin (ML) € 62.29 +0.63%
Essilor International (EI) € 73.15 +0.59%
Pernod Ricard (RI) € 86.31 +0.54%
CAC 40 - Fallers
EADS (EAD) € 25.15 -10.20%
Vinci (DG) € 35.46 -3.62%
Societe Generale (GLE) € 23.92 -3.26%
Schneider Electric (SU) € 50.19 -3.20%
Vallourec (VK) € 35.74 -2.75%
Peugeot (UG) € 6.69 -2.66%
Carrefour (CA) € 16.81 -2.58%
Saint Gobain (SGO) € 28.44 -2.52%
Credit Agricole (ACA) € 5.74 -2.46%
Bouygues (EN) € 20.11 -2.31%