Europe midday: Stocks retreat ahead of ECB policy decision, euro gains

Ahead of the European Central Bank’s policy statement, European stocks retreated on Thursday with oil prices down and the euro gained.

At midday, the benchmark Stoxx Europe 600 index was down 0.3% to 371.47, Germany’s DAX fell 0.23% at 11,939.85 and France’s CAC 40 was 0.22% weaker at 4,949.61.

Meanwhile, oil prices were on the back foot following higher-than-expected US inventories data from Thursday which fuelled fears of oversupply.

West Texas Intermediate was down 2.65% to $48.97 per barrel - the first time prices have gone below $50 in 2017 - while Brent crude fell 2.58% to $51.77.

In currency markets, the euro rose 0.22% against the dollar to 1.0564 and was up 0.28% versus the pound to 0.86875.

The ECB will announce its latest interest rate decision on Thursday with analysts at Monex Europe not expecting a change in policy, although ECB president Mario Draghi's press conference will be examined for hints that the central bank’s commitment to continuing monetary policy may be wavering.

“Inflation in the Eurozone is now at 2% for the first time in four years, and some of the more hawkish members of the ECB have already argued that if this increase is sustainable, the ECB should begin to withdraw accommodation.”

However Craig Erlam, senior market analyst at Oanda, said that it was “too early” to remove accommodation again, with the ECB having only cut its asset purchase programme by €20bn in December, which is to come into effect in April.

Erlam said that the last thing that Draghi would want to do is rock the boat ahead of elections in the Netherlands and France with popular parties anti-euro.

“In the press conference after, we may get some insight into what the central bank intends to do later this year when the current quantitative easing program expires. This is what will create waves in the markets, assuming he gives anything away of course. I think it’s more likely that he’ll refrain from letting much go at this early stage but highlight the improvement in the data and possible reduction in downside risks,” he said.

The ECB’s interest rate decision will be posted at 1245 GMT, followed by a news conference by Draghi at 1330 GMT.

On the data front, the French central bank's business confidence index rose to 104 in February from 102 the previous month, and ahead of 102 consensus forecast. Non-farm payrolls in France grew 0.4% quarter-on-quarter in the final three months of 2016, according to INSEE.

Dutch consumer prices increased 0.9% month-on-month in February and 1.7% year-on-year as expected.

Ireland’s fourth quarter GDP increased by 2.5% to 5.2%, compared to the previous quarter and was the European Union's fastest growing economy for the third consecutive year in 2016.

In corporate news Dutch chemicals company Akzo Nobel climbed 14.58% after it rejected a €20.9bn offer by US rival PPG Industries.

Carrefour was down 5.17% after the French supermarket giant reported that operating profit dropped 3.2% to €2.4bn and kept its dividend steady.

Merck fell 2.13% after the German pharmaceuticals posted a cautious outlook for 2017, although fourth-quarter profit more than doubled.

Aviva gained 6.46% after the insurer said it was making a £380m charge to account for the change on personal injury claim payouts and that full year operating profits rose 12% to £3bn.