- ECB keeps interest rate on hold
- Draghi says Eurozone recovery weak
- Italy's Letta wins confidence vote
- US government shutdown moves into second day
FTSE 100: -0.35%
CAC 40: -0.92%
FTSE MIB: 0.68%
IBEX 35: 0.09%
Stoxx 600: -0.66%
European equities were mixed after the region's central bank kept its monetary policy unchanged and after Italian Prime Minister Enrico Letta won a confidence vote.
European Central Bank (ECB) President Mario Draghi said the Eurozone's recovery remains weak after the monetary authority announced it would maintain interest rates at 0.5%.
While recent data has indicated that the Eurozone's economy is improving, Draghi warned that it would take some time before it was out of the woods.
He reiterated that the ECB stands ready to provide further accommodative policy if needed in future.
"We'll remaim particularly attentive to developments which may have implications to monetary policy and consider all available instruments," he said.
Draghi was also asked about the political turmoil in Italy as Prime Minister Letta won a confidence vote in the coalition today after centre-right People of Freedom party leader Silvio Berlusconi made a last minute U-turn.
Berlusconi had initially demanded that five ministers from his party leave the coalition, which prompted the vote, but he backed down when several of his senators refused to support him.
Draghi said that the Eurozone would prove resilient against any instability in Italy as it was stronger than a few years ago.
US government shutdown moves into day two
The US government shutdown dragged into the second day as economists raised concerns over the debt ceiling.
The closure started on Tuesday for the first time in 17 years after Congress failed to reach a deal on the budget by the Monday midnight deadline.
The shutdown is expected to shave 0.1 percentage point from economic growth, according to Bloomberg's median estimate of economists, with costs rising if the closure continues.
The impact of the debt ceiling is considered to pose the biggest threat. The government reached its $16.7trn debt ceiling in May and since then has been using emergency measures to conserve cash.
Treasury will have about $30bn in cash on hand by October 17th, barely enough to pay its bills.
"The repercussions of a deal not being done on the debt ceiling would be much worse," said Craig Erlam, Market Strategist at Alpari, who expects policymakers to continue to butt heads for the next two weeks before coming to an agreement.
"With that in mind, and seeing that both sides still appear to be in no rush to broker a deal and instead appear more concerned with pointing the finger and playing politics, the next two weeks could be very tense and very negative for the markets."
Retail stocks slide
Tesco plunged after the UK supermarket chain posted a fall in half year profit that fell short of analysts' expectations.
Rival grocer Sainsbury's also slumped despite trumping Tesco with a rise in second quarter sales in line with forecasts.
A gauge of retailers posted the largest decline on the Stoxx 600 including
Carrefour and Casino Guichard Perrachon.
KappAhl fell after the clothing retailer proposed paying no dividend this financial year.
MorphoSys gained after saying that Novartis AG kicked off a milestone payment for the company by starting a clinical trial.
Portugal Telecom SGPS SA advanced after agreeing to merge with Brazil's Oi SA to form a network operator with 100m subscribers.
Euro bounces after Draghi speech
The euro jumped up 0.50% to the 1.3593 US dollar
following Draghi's press conference.
Brent crude futures rose $0.818 to $108.840 per barrel on the ICE.