Europe close: Stocks move lower ahead of holiday break

European equity markets fell into the red ahead of the Easter holidays, with basic resources and energy stocks under the cosh as metals and oil prices declined.

The benchmark DJ Stoxx Europe 600 finished 1.46% lower to 335.10, Germany’s DAX surrendered 1.71% to end at 9,851.35 and France’s CAC 40 was off 2.13%.

At the same time, oil prices continued to slide after a report from the US Department of Energy showed crude stockpiles rose by 9.4m barrels in the previous week – a much bigger increase than analysts had expected.

West Texas Intermediate was down 0.658% to $39.53 a barrel while Brent crude was 0.297% weaker at $40.35.

The Stoxx 600 oil and gas index fell 2.78 points or 1.05% to 261.29, while the sub-index for basic resources was down 1.48% or 3.93 points at 261.80 as metals prices dropped and that for banks by -2.04% to 146.69.

“The culprits are not difficult to find – a rising US dollar and weaker oil prices. The former continues to benefit from Fed policymaker comments that seem to suggest the dovish view of the recent FOMC meeting was not perhaps the correct one,” said Chris Beauchamp, senior market analyst at IG.

“Oil markets meanwhile seem to have rediscovered the massive supply overhang that, for various reasons, did not seem to matter over the past five weeks. Dovish central banks and rising oil prices have been the twin struts on which this rally is built – if these are falling apart then the new quarter may not begin well for stock markets.”

Although last week’s statement from the Federal Reserve was dovish, Fed officials have since expressed a much more bullish tone.

On Wednesday, St Louis Fed President James Bullard added to comments from other Fed officials as he pointed to the possibility of at least two rate hikes this year, with the first potentially next month.

The dollar got a boost from these comments, in turn weighing on basic resources as a strong greenback makes dollar-denominated commodities more expensive for buyers holding other currencies.

Corporate news was thin on the ground ahead of the Easter break.

In London, clothing retailer Next tumbled after it said full year profits were at the upper end of expectations but warned the year ahead could be the toughest since 2008.

Elsewhere, the Italian banking sector was on the back foot after Banco Popolare and Banca Popolare di Milano agreed to merge on Wednesday.

Acting as a backdrop, US capital investment in durable goods fell back into decline in February, after a spike in January, according to data from the Commerce Department.

Durable goods orders fell 2.8% on the previous month, slightly better than the -3.0% consensus estimate, although it was much worse than the downwardly revised increase of 4.20% for the month before.

The number of Americans filing for unemployment benefits rose a little last week, according to the Labor Department.

US initial jobless claims rose by 6,000 to 265,000, versus economists’ expectations for an increase to 268,000.

Meanwhile, the previous week’s level was revised down by 6,000 from 265,000 to 259,000.