- Strong US data fuels Fed tapering fears
- ECB to introduce further easing, says Danske Bank
- Cameron vows to back EU-China trade deal
FTSE 100: -0.19%
CAC 40: -0.60%
FTSE MIB: 0.12%
IBEX 35: -0.23%
Stoxx 600: -0.20%
European equities were mostly lower as strong US data fuelled concerns about the prospect of a December tapering of monetary stimulus from the Federal Reserve.
Yesterday's release of better-than-expected manufacturing data sent stocks sliding.
The Institute for Supply Management (ISM) said its manufacturing sector purchasing managers' index (PMI) rose to 57.3 in November from 56.4 a month earlier, exceeding the 55.1 forecast and the 50 reading that signals expansion.
Fed policymakers are turning to economic data to gauge the health of the world's biggest economy in deciding when to start scaling back its monthly $85bn bond buying programme.
While most economists don't see a tapering until March 2014, the Fed has indicated that tapering could come as soon as its mid-December meeting as more robust US data suggests the country is recovering faster than expected.
The pick-up in the economy comes despite the partial government shutdown in October.
"The shutdown actually appears to have had absolutely no impact on the data that we've seen so far, which is good for the economy but bad for stock markets," said Alpari analyst Craig Erlam.
"This is the problem with the current situation in the US. A deterioration in the data sends US indices to record highs while signs of improving economic conditions sends investors rushing for the exit."
Investors will now wait for all-important US employment numbers on Friday.
ECB monetary stimulus
The European Central Bank (ECB) will introduce further monetary easing but its December meeting is too soon for such a move, according to Danske Bank Markets.
The bank noted that while inflation rose to 0.9% in November from 0.7% in October, it is still well below the ECB's 2% target. Falling inflation prompted the central bank to cut its benchmark interest rate to 0.25% from 0.5% last month.
"Inflation will still be top of the agenda and we expect Draghi to be dovish and signal that they are ready to act to ensure inflation expectations remain well anchored," Danske said of this month's upcoming meeting.
"The need for more monetary stimulus is set to be reflected in the ECB's projections. The inflation forecast for 2014 is expected to be lowered to 1% and the first release of the 2015 inflation projection should remain far below the ECB's target."
Dankse also expects the ECB to refrain from cutting rates further and instead introduce a new three-year long term refinancing operation (LTRO) in the first quarter, when data for the Asset Quality Review (AQR) has been collected.
Meanwhile, UK Prime Minister David Cameron has vowed to back a multi-billion-dollar free trade deal between China and the European Union.
During his three-day visit with about 100 business people, Cameron said Britain was open to Chinese investment and was well-placed to take advantage of its market liberalisation.
His remarks are likely to irritate the European Commission which is said to be opposed to such a deal out of fear that it risks flooding the 28-nation bloc with cheap Chinese imports.
ThyssenKrupp declined after a report obtained by Bloomberg News showed the steelmaker will sell 51m new shares
at a price range between €17.05 and €17.15 each.
Sonova slumped after Morgan Stanley downgraded the stock to 'equal weight' from 'overweight'.
Miners including Antofagasta, Fresnillo and Vedanta Resources edged lower after the price of commodities dropped sharply yesterday with gold hitting a five-month low.
Euro strengthens against dollar
The euro rose 0.20% to $1.3569.
West Texas Intermediate crude futures gained $2.06 to $111.680 per barrel on the ICE.