Europe close: Periphery stocks come under pressure

Stocks saw slight falls at the end of the week, although periphery stocks came under heavier selling pressure as investors took an increasinly cautious stance ahead of the 4 December Italian constitutional referendum.

A poll blackout will come into force on Saturday, just over two weeks before the referendum takes place.

About 42% of those who said they will vote are going to reject the referendum proposal of reducing the powers of the Senate and handing more power to the central government.

Milan´s FTSE Mibtel took a bit of a beating as a result, retreating 1.75%, and Madrid´s Ibex 35 slipped 1.09%, while the benchmark Stoxx Europe 600 index was down 0.36%, France’s CAC 40 fell 0.52% and Germany’s DAX was just 0.20% lower.

Oil prices were slightly higher after early selling pressure as the US dollar continued climbing higher. West Texas Intermediate was up 0.15% to $45.49 a barrel and Brent crude 0.279% higher at $46.62.

Speaking early on Friday morning, St.Louis Fed president James Bullard said he was "leaning" towards a move on rates in December, while his opposite number at the Kansas City Fed said later in the day that she preferred moving sooner rather than later.

At one point that saw selling in the euro/dollar accelerate, with market observers beginning to cast a wary eye towards technical support at 1.04610 - the March 2015 lows - and parity afterwards.

On a brighter note, but perhaps also contributing to the weaker euro, European Central Bank President Mario Draghi appeared to hint on Friday that the central bank is likely to extend its €1.7trn bond-purchase programme next month. Speaking at the European Banking Congress in Frankfurt, Draghi said the Eurozone economy remains heavily dependent on monetary stimulus.

“Despite the uplift to prices provided by the gradual closing of the output gap, a sustained adjustment in the path of inflation still relies on the continuation of the current, unprecedented financing conditions," he said.

"It is for this reason that we remain committed to preserving the very substantial degree of monetary accommodation, which is necessary to secure a sustained convergence of inflation towards level below, but close to, 2% over the medium-term.”

By early afternoon, the euro was flat against the dollar at 1.0624 after Draghi implied a stimulus boost. This helped exporters on the European exchanges but weighed on the basic resources sector, as a stronger greenback makes dollar-denominated commodities more expensive for holders of other currencies.

In paralalle, Fed funds futures continued to price-in higher odds of a US rate hike in December and of another in 2017.

At the close, the Stoxx 600 sub-index for basic resources was down 1.92%.

IG market analyst Joshua Mahony said: “The dollar is once more at the forefront of investors mindsets, as the incessant rise which has dominated the post-election period continues apace. In a high growth environment, it is likely we will see investors moving into the US as a source of capital appreciation. However, the hesitancy seen in US stock markets is a clear nod to the fact that with such dollar appreciation comes an environment which is progressively more difficult for US exporters.”

In corporate news, German car-maker Volkswagen gained as it announced its plans to cut 30,000 jobs worldwide with 23,000 of them in Germany, representing a total of 5% of its global workforce.

Engineering distribution firm Electrocomponents rallied after reporting a 44% jump in first half profits to £55.1m.

DIY company Grafton Group rose as it has agreed to by Dutch ironmonger Gunters en Meuser in order to increase its presence in Amsterdam.

On the downside, Lafargeholcim declined after cutting its mid-term profit outlook and announcing plans for a CHF1bn share buyback.

Specialty chemicals company Bodycote fell despite posting a rise in revenue in the four months to the end of October.