London: European shares drifted lower on Thursday, down for a seventh straight day in a choppy session, with retailers coming under pressure on a grim consumer spending outlook and banking shares hitting one-year lows.
Financials lost ground as the euro zone looked to the private players for a solution for Greece’s debt crisis. The block edged closer to a compromise on a second Greek bailout package under which private creditors would be asked to swap their sovereign debt holdings for bonds with longer maturities.
The STOXX Europe 600 banking index fell 0.6%, while Bank of Ireland was down 2.8% and Commerzbank fell 2.4%.
At 4:29pm, the FTSEurofirst 300 index of top European shares was down 0.1% at 1,093.81 points after moving in and out of positive territory. The index is down 2.5% so far this year.
Retailers were among the top fallers, with the Stoxx 600 Europe retail index down 0.6% and Home Retail, Britain’s biggest household goods retailer, slipping 12.5% after saying cash-strapped shoppers had cut back on purchases, raising fears of another downturn in spending.
Investors waited for a news conference by Jean-Claude Trichet, president of the European Central Bank, which held interest rates and is expected to signal a rise in July to tackle price pressures in the euro zone.
The central bank, which faces pressure to help clear the way for a new Greece bailout plan, is also expected to use higher staff inflation forecasts, to be published during the post-policy meeting news conference, as justification for higher rates to come.
“I think the ECB will stick to its policy normalisation approach and will revise higher the growth and inflation outlook, which will also be a justification for a rate hike,” said Klaus Wiener, chief economist at Generali Investments, which manages 330 billion euros ($482 billion).
“But if they think that current conditions do not warrant a rate hike it would be a negative signal for the market. It would show that concerns within the ECB are so deep that it would bring them away from the policy normalisation path they have chosen.”
The Bank of England also kept its interest rates at a record low as signs of economic weakness at home and abroad appeared to outweigh any concerns the bank’s monetary policymakers might have about inflation.