Europe close: Losses in auto sector drive stocks lower

European equity markets managed to trim their losses on Thursday, apparently after a top US central bank official sounded a 'dovish' note and oil prices bounced back, but still suffered a considerable setback with the auto sector at the bottom of the pile.

The benchmark Stoxx Europe 600 index was down 1.51%, Germany’s DAX by 1.67% and France’s CAC by another 1.8%.

In London, the FTSE 100 was down 0.72% after the Bank of England kept interest rates and its asset-purchase programme on hold at 0.5% and £375bn.

Oil prices on the other hand recovered after Brent fell below $30 in Asian trade amid a global supply glut. West Texas Intermediate was up 2.4% to $31.24 while Brent crude was 1.89% higher to $30.89.

A rebound in crude oil futures ensued after the president of the US Fed bank of St.Louis, James Bullard, expressed concern over the recent slide in inflation expectations.

That came alongside a bland MPC policy statement, despite which analysts at Barclays pushed out their forecast for the first increase in Bank Rate.

Car maker Renault became the latest European carmaker to be sidewiped by worries over possible emissions testing fraud, sending its shares precipitously lower.

Reports indicated French fraud investigators had seized computers from the company as part of a suspected probe into emissions testing.

The news weighed on the broader sector, pushing the Stoxx 600 autos and parts index down by a whopping 6% at one point in the session. The sector sub-index finished lower by 3.67%.

Meanwhile, a series of bomb blasts and gun battles on the streets of the Indonesian capital of Jakarta, which were being blamed on Islamic State militants, hit travel stocks.

The Stoxx 600 travel and leisure index fell 3.97%.

Elsewhere, shares in French supermarket operator Casino dropped after it posted an 11% drop in fourth quarter revenue.

Alstom was in the red after the maker of TGV high-speed trains said nine-month orders fell 22%.

Norway’s biggest energy company, Statoil, was also on the back foot after acquiring a stake in Swedish oil and gas rival Lundin Petroleum, whose shares rose.

On the upside, stock in supermarket retailer Tesco surged after it reported an impressive like-for-like improvement over the Christmas period.

Luxury clothing retailer Burberry edged higher after it reported a 1% rise in underlying third quarter sales to £603m, with comparable sales unchanged year-on-year against a 4% drop in the previous quarter.

On the data front, figures released by Destatis showed German gross domestic product rose 1.7% in 2015.

The reading, which was in line with economists’ expectations, marked a marginal improvement on the 1.6% growth of 2014 and the strongest rate in four years.