Europe close: Stocks hit as government bonds retreat

Stocks on the Continent finished near their worst levels of the session as government bond markets tracked losses in US Treasuries overnight.

Speaking at an event hosted by The Atlantic magazine and the Aspen Institute on Wednesday evening, US central bank chief, Jerome Powell, defended that a gradual path of interest rate hikes was the best way to move forward but also said America was experiencing "a remarkably positive set of economic circumstances."

Other top Fed officials who also made policy-relevant remarks had delivered a more mixed set of views.

Yet the yield on the US 'Long Bond', as the US Treasury's 30-year bond is called, snapped higher by 12 basis points to 3.34%, breaking out to a four-year high and the Treasury yield curve steepened back out to 33 basis points, even as the market-implied odds of another Fed hike in December jumped o roughly 82%, according to the CME's Fed Watch tool.

European government debt were dragged lower as a result, with the debt of 'core' countries such as France and Germany among the worst performers.

Against that backdrop, by the end of trading the benchmark Stoxx 600 was down by 1.08% or 4.16 points to 379.68, alongside a drop of 1.47% or 80.55 points to 5,445.42 for the Cac-40 and a retreat of 0.25% or 54.30 points to 20,681.93 on the FTSE Mibtel.

One bright spot however were lenders' shares, with the corresponding Stoxx 600 sector gauge gaining 0.38% or 0.59 points to 155.36.

Greek banks did especially well, with shares of Piraeus jumping 9.23% and Alpha Bank up 7.62%.

According to Bloomberg, officials in Athens were studying a plan to help banks dispose of their bad loans more quickly.

Germany's Dax was an outlier, although it too finished lower, retreating by a more modest 0.35% or 43.44 points to 12,244.14, boosted by a sharp drop overnight in the euro and after having missed out on Wednesday's gains in shares across the Continent.

The yield on the 10-year bund rose by six basis points to 0.53% and that on similarly-dated French OATs by five to 0.87%, while Italian BTP yields added two to 3.33% and that on the Spanish bonos was up by three to 1.56%.

Italian bonds appeared to be relatively well-behaved despite remarks from deputy prime minister, Matteo Salvini, who told state radio RAI that the country would not change its deficit targets even if the risk premium on its sovereign debt hit 400 basis points.

Greek 10-year bond yields continued to move higher, but pared an earlier 16 basis point rise to stand nine basis points higher at 4.50% at the close. On Monday, Athens had lifted the restrictions on bank withdrawals which had been imposed in 2015.

On the corporate front, Banca Monte dei Paschi di Siena is in talks to sell its Belgian arm to Warburg Pincus, Bloomberg reported citing people familiar with the matter.