Europe close: Euro powers ahead, weighing on stocks

European stocks remained stuck in the red on Wednesday as the strong euro, weak bank results and falling commodities prices all weighed.

By the closing bell the Stoxx 600 benchmark was 0.43% lower at 378.63, with Germany's DAX continuing to fall as the session wore on, down 0.57%, France's CAC 40 paring losses to 0.39% and Italy's MIB leaving behind 0.18%.

This was despite a strong showing on Wall Street, where Apple surprised with results for its normally soft third quarter, which lead many analysts to call Europe higher in the pre-open.

The EUR/USD continued to move higher tacking on a hefty 0.51% on the dollar to trade at 1.1866 and was 0.38% higher against sterling to 0.8964.

Analyst David Madden at CMC Markets saying: "The US dollar has been in decline lately as traders think the Federal Reserve are unlikely to hike interest rates again this year."

Also helping the single currency, the jobless rate in Spain dropped by 26,000 in July.

In parallel, producer prices eased by less than expected, according to figures from Eurostat. The producer price index moved to 2.5% for June from 3.4% the month before, when it had been forecast to fall to 2.4%.

Banks were led lower by France's Société Générale as it fell 4% after reporting a 28% decline in second-quarter net profits, while Germany's Commerzbank swung to a net loss in the second quarter, with weak markets and job-related restructuring blamed.

Standard Chartered was also down but its first-half profits were 82% higher, with analysts and investors disappointed that the dividend was not reinstated.

One drag on stocks in Europe and possibly in the US later has been the fall in commodities prices, with oil, gold, silver and copper losing ground.

Chris Beauchamp at IG noted that Europe's falls followed their "heroic efforts" in the previous session, "with the possibility that Tuesday's gains could be the last hurrah for the bulls, as weaker seasonality takes over for stock markets – August tends to be a tough month for equities, so with the usual ‘first day of the month’ excitement out of the way, today might be a truer reflection of what we can expect for the rest of August, if history is any guide".