Shares in Europe traded lower on Thursday as investors digested comments from the U.S. Federal Reserve chief and monitor events in Italy.
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The pan-European Stoxx 600 was off by 0.7 percent with almost every sector in the red. Household goods were the worst performers, down by more than 2 percent. Markets were adapting to further hawkish comments from the U.S. central bank. Jerome Powell, the U.S. Fed chairman, said that the bank was a “long way” from neutral on interest rates.
Powell’s comments pushed the dollar to an 11-month high against the Japanese yen and they also pushed yields in euro zone bonds. High yields in bond markets tend to be negative for stocks, given that they mean higher costs for companies.
Looking across the European index, Electrocomponents was among the top performers, up by more than 3 percent, after reporting that first-half profits jumped 27 percent from a year ago.
Shares in Danske Bank dropped 3 percent following news that the bank will be investigated by the U.S. Department of Justice for a money laundering scandal. Such probe could result in a big fine.
Meanwhile, investors kept a close eye on Italian politics. Prime Minister Giuseppe Conte said on Wednesday that the government deficit will be decreased in the next three years, despite the surge planned for 2019. Market players are worried about extra spending in the third largest euro economy, given its 130 percent of GDP debt pile. The main index in Italy, FTSE MIB, was down by 0.5 percent.
Elsewhere, shares in Greek banks are in the spotlight after a massive plunge on Wednesday. Investors fear that regulators will demand further capital. In late morning deals, the biggest Greek lenders traded in positive ground, recovering some of Wednesday’s losses.