Europe close: Stocks close lower as fresh US data arrives

European stocks closed in the red on Tuesday as investors sifted through US consumer sales and manufacturing data, while basic resources were under the cosh.

At close, the benchmark Stoxx Europe 600 index was down 1.09%, France’s CAC 40 was off 0.75% and Germany’s DAX was down 0.56%.

Basic resources were among the worst performers as copper prices slid, with the Stoxx 600 index for the sector down 4.82%.

At the same time, oil prices were weaker, with West Texas Intermediate down 2.96 to $36.11 a barrel and Brent crude 2.6% lower at $38.53 after OPEC warned on Monday that supply would likely be higher than expected this year.

US retail sales dropped albeit less than expected in February and January's data was revised down into negative territory, the Commerce Department revealed. Sales fell 0.1% month-on-month to $447.3bn in February, the first drop since September. The decline was not as bad as the 0.2% consensus forecast, however. On an annual basis sales were up 2.9%.

But January's sales data was revised markedly down to a 0.4% fall, having been initially published as a 0.2% rise.

Economists said this added another reason for the Federal Reserve to hold off from raising interest rates. The Fed announces its policy decision on Wednesday and is widely expected to keep measures unchanged.

“A weaker than previously thought retail sales trend so far this year puts further pressure on US policymakers to hold off hiking interest rates," said economist Chris Williamson at Markit.

Morgan Stanley now expects the US central bank to delay its next rate hike until the December meeting, which is a big departure from its previous expectation of three hikes this year.

Earlier the Bank of Japan decided to stand pat on interest rates despite worsening conditions in the world’s third largest economy. The central bank also downgraded its view of the economy and inflation expectations.

“Although it was broadly expected that the central bank remains on standby following the souring mood from the negative interest rate cut on the 29th, the ongoing global woes which have exposed Japan to downside risk have left the central bank under immense pressure to take action,” said FXTM research analyst Lukman Otunuga.

In corporate news, Legal & General was weaker despite reporting a 14% rise in full year operating profit and lifting its full year dividend.

Antofagasta fell sharply after posting a 58% drop in full year earnings and cancelling its final dividend.

Elsewhere, Swedish retailer Hennes & Mauritz was in the red after its February sales figures failed to impress.

Beleaguered German car maker Volkswagen was also under pressure after institutional investors from around the world sued the company for €3.3bn over the emissions cheating scandal.

On the upside, French telecoms operator SFR gained after it said core operating profit rose 20% in 2015 to €3.86bn.

Data released earlier by Eurostat showed Eurozone employment rose 0.3% in the fourth quarter compared to the previous three months. Compared to the same quarter a year ago, employment increased 1.2% in the euro-area.

In the third quarter, employment gained 0.3% on the quarter and 1.1% on the year.