Europe close: Stocks dip as ECB's Draghi dashes hopes for policy change

Stocks failed to overcome the strength in the euro after European Central Bank chief Mario Draghi brushed off any hint of concern about its recent ascent and pushed back on market expectations for an imminent shift in policy guidance.

At the closing bell, the Stoxx 600 was down by 0.38% or 1.47 points to 384.07, alongside a fall of 0.04% or 4.80 points to 12,447.80 for the German Dax, while the Cac-40 slipped 0.32% or 1.47 points to see the day out from 5,199.22.

The instigator of the selling, the euro, was 0.98% higher against the greenback to 1.1627, while sterling sold off by 1.37% to 1.1157.

In parallel, the yield on the benchmark 10-year bund was one basis point lower to 0.53%.

As expected, the ECB kept all its main policy rates unchanged on Thursday, with that on the main refinancing facility steady at 0.0%, as well as its guidance for its asset purchase programme.

Yet ECB chief Mario Draghi pushed back by more than was expected against recent speculation that a shift in its QE-guidance was imminent.

"We are not there yet," Draghi told the assembled journalists.

On the other hand, he did say the current policy stance would be discussed in the fall (not before or in September as some believed would be the case)- but not much more.

Not lost on FX traders, when queried by a journalist regarding recent strength in the euro, Draghi said financing conditions in the currency bloc were still "favourable".

In general terms, throughout its short history the ECB has almost always taken a 'hands-off' approach when it came to making comments about the foreign exchange market.

Nonetheless, some economists continued to harbour hopes of some sort of a policy shift at the 7 September meeting of the Governing Council.

"Mr. Draghi sounded non-committal on the timing of any tapering announcement, stating that a decision will be taken in autumn. This leaves the GC on track for an announcement at the 7 September meeting, although risks of a delay until October have increased. In this regard, developments in financial conditions will be key," said Marco Valli, head of Macro Research at Unicredit.

"All in all, today’s ECB meeting was dovish and emphasized a slow removal of monetary stimulus after the end of 2017, consistent with our expectations. In the base case, the ECB will likely reduce its monthly asset purchases by €5-€10bn euros per month beginning in January 2018, and conclude a taper of QE in the second half of 2018," chipped in Bill Adams, senior international economist at PNC Financial Services.

To take note of, overnight the Bank of Japan also sounded a dovish note.

Also in the background, according to Bank of America-Merrill Lynch's July Fund Manager Survey, which was released the day before, the proportion of investors who believed global monetary policy was "too stimulative" increased in July to a net 48%, the highest level since April 2011.

The same survey showed that 28% of investors saw a 'crash' in global bond markets as the biggest risk, just ahead of the 27% who believed the most significant danger was a 'policy mistake' by the US Federal Reserve or the ECB.

In economic news, the euro area's current account surplus rose sharply in May to reach €30.1bn, versus a revised reading of €23.5bn for the previous month, as the deficit on the secondary income balance shrank from €18.6bn to €10.7bn, the ECB said.

Factory gate prices in the Eurozone's largest economy, Germany declined from a 2.8% year-on-year clip in May to 2.4% for June (consensus: 2.3%), the Federal Office of Statistics reported.

On the corporate front, German software giant SAP said second quarter revenues jumped 10.4% to €5.78bn (consensus: €5.71bn).

French spirits maker Remy Cointreau reported accelerating sales during the first quarter, which came in ahead of forecasts.

Semiconductor-maker Soitec posted a 22% increase in revenues during its first quarter.