Europe close: French polls, Trump in the spotlight ahead of Easter

With 10 days to go until the French head to the polls, European equity markets fell on Maundy Thursday as investors digested the latest comments from US President Donald Trump which sent bank stocks down across the euro area and sparked buying in the euro as the Greenback was put on its backfoot.

All European bourses will be closed on Good Friday and Easter Monday, but US markets will trade as usual on Monday.

At the closing bell, the benchmark Stoxx Europe 600 index was down 0.35% to 380.58, Germany’s DAX fell 0.38% to 12,109.00 and France’s CAC was 0.59% weaker at 5,071.10. Italy's FTSE Mibtel was especially weak, retreating by 1.16%.

The Stoxx 600 gauge of lenders' shares was 1.23% weaker at 171.86 as Trump's weighed on government bond yields on both sides of the Atlantic, which is a headwind for bank margins. In turn, the euro and gold futures were buoyed.

Meanwhile, Brent crude and West Texas Intermediate were both holding slightly lower after a recent strong run at $55.62 and $52.97 per barrel, respectively.

Safe-haven assets continued their gains amid mounting fears of a new weapons test by North Korea as a US carrier group sails towards the area and the latest comments by Trump, which also set off a bout of weakness in the US dollar.

Gold on Comex was up 0.74% to $1,287.40 per troy ounce, while yellow metal stocks Randgold Resources, Centamin and Acacia Mining rallied.

Trump said on Thursday that the dollar was "too strong" and that he wants interest rates to remain low. His comments came after Federal Reserve Chair Janet Yellen said earlier in the week that a neutral stance on US monetary policy would be appropriate.

He told The Wall Street Journal: "I think our dollar is getting too strong, and partially that's my fault because people have confidence in me. But that's hurting - that will hurt ultimately."

He added: "It's very, very hard to compete when you have a strong dollar and other countries are devaluing their currency."

In currency markets, the euro was down 0.27% versus the dollar to 1.0627 and fell 0.2% against the pound to 0.8487.

Concerns about the French election weren't far from traders' minds, with far-left candidate Jean-Luc Mélenchon gaining ground on frontrunners independent centrist Emmanuel Macron and far-right Marine Le Pen.

Berenberg economists Holger Schmieding and Florian Hense said that reformer Macron remains the clear favourite to win, "but the tail risk that neither Macron nor the centre-right reformer François Fillon may make one of the top two places in the first round of the presidential vote on 23 April looms larger than before".

"For France, Europe and markets, a run-off between Mélenchon and ultra-right Marine Le Pen on 7 May would be a choice between bad and ugly. We continue to see a 10% risk that Le Pen will be the next French president. However, we now add a 10% risk of an almost equally negative outcome, namely that Mélenchon may win."

Their comments were echoed by strategists at JP Morgan.

Investors are also expecting a close race in Turkey's referendum on Sunday on whether to grant more powers to President Recep Tayyip Erdogan.

On the data front, March’s final revisions of French and German inflation at 0.6% and 0.2%, respectively, were unchanged from previous estimates.

In corporate news, Svenska Cellulosa climbed 7.76% after Dagens Nyheter newspaper said a consortium of private equity firms were seeking to buy the Swedish consumer good company’s hygiene business for about 200bn Swedish crowns ($22bn).

Lufthansa dropped 1.1% after Bloomberg reported that investor Infinite Miles had sold a 2.5% stake in the German airline.