Europe close: German stocks give back gains amid political impasse
Stocks ended the session modestly lower as traders waited for the release of the minutes of the US Federal Reserve's last rate-setting meeting in the evening and monitored the news-flow out of Germany, amid speculation that a 'grand coalition' between Germany's two main political parties, the centre-right CDU/CSU and the Socialist SPD, may yet be possible.
By the closing bell, the benchmark Stoxx 600 was down by 0.27% or 1.04 points to 387.06 with the FTSE Mibtel drifting lower by 0.05% or 11.20 points to 22,315.24 but Spain's Ibex 35 managing a gain of 0.21% or 20.50 points to 10,013.90.
The German Dax on the other hand gave back 1.16% or 152.50 points to 13,015.04.
Acting as a backdrop, overnight the outgoing Fed chief, Janet Yellen cautioned that tightening monetary policy too fast could strand inflation below the central bank's 2% target.
On that note, on Wednesday morning Jim Reid at Deutsche Bank pointed out to clients how the interest rate spread between two and 10-yaer US government Treasury notes had fallen below 60 basis points the day before, for the first time in a decade.
"Staying with the Fed, our economists put out a piece last night suggesting that in recent weeks, many Fed officials have raised the possibility of re-considering the Fed's current policy framework of targeting a 2% inflation rate. Today’s minutes could provide further indications that this is becoming a lively debate among Fed officials.
"Given the breadth and the increase in the intensity of this discussion, our guys think markets should take note and they go through the pros and cons of all the possible alternatives to the 2% inflation target," said Reid.
Back in Europe, focus was on a meeting between German president Frank Walter Steinmeier and SPD head Martin Schulz scheduled for Thursday in which the latter was expected to come under pressure to row back on his vow not to ally his party with Merkel ever again.
Steinmeier was due to meet CSU head Horst Seehofer on Wednesday after having met with the leaders of the Freedom Democrats and Greens on Tuesday.
Commenting on the possibility of a grand coalition, in a research note sent to clients Berenberg's chief economist Holger Schmieding said the SPD would be able extract major concessions, but that might no longer be the case if fresh elections were called.
Economic data was again light on the ground on the Continent, with the main release on Wednesday being a reading on euro area consumer confidence for November at 1500 GMT.
Earlier, the Dutch Central Bureau of Statistics reported that its own index of consumer sentiment printed at 23.0 for November, the same as over the prior two months.