Europe close: Stocks tumble after Draghi hints at more QE

European equities tumbled on Thursday as earnings downgrades undermined sentiment, while the euro lost ground after European Central Bank chief Mario Draghi hinted that further policy easing may be on the cards.

The benchmark Stoxx Europe 600 index closed down 1.62%, while France’s CAC 40 lost 1.94% and Germany’s DAX fell 1.15%.

"Inflation dynamics have somewhat weakened, mainly due to lower oil prices and the delayed effects of the stronger euro exchange rate seen earlier in the year,” Draghi said to the Committee on Economic and Monetary Affairs of the European Parliament in Brussels.

“In addition, price pressures, such as from producer prices, remain very subdued.”

In the aftermath of Draghi’s comments, the euro tumbled to a three-month low against the pound but as of 1641 GMT the European currency gained 0.10% against its British counterpart and 0.13% and 0.04% against the yen and the dollar respectively, while Brent crude tumbled 3.03% to $44.46 a barrel.

“Mario Draghi continues to render the December ECB meeting almost meaningless, as he drops increasing hints about more QE for the Eurozone,” said IG’s senior market analyst Chris Beauchamp.

“While this helped to push the euro down once again, it did little for stock markets on the continent.”

Eurozone industrial production slows down

On the economic data front, figures released by the European Union’s statistics office, production in the Eurozone declined 0.3% in September compared with analysts’ forecast for a 0.1% decline and with an upwardly revised 0.4% drop in the previous month.

On a year-on-year basis, however, production rose 1.7%, beating expectations for a 1.3% reading but slightly below the upwardly revised 2.2% gain registered in the previous month.

Meanwhile, Germany’s statistical office said the consumer price index rose 0.3% year-on-year in October, in line with expectations and unchanged from the previous month, while harmonised CPI was flat versus the previous month and rose 0.2% year-on-year, in line with consensus.

In company news, German power producer RWE plunged 9.23% after it cautioned that it would only just meet its full-year net profit target.

British Airways and Iberia parent International Consolidated Airlines Group fell 3.04% as it announced plans to sell €1bn of convertible bonds to help repay a bridge facility it entered into to finance the acquisition of Aer Lingus.

On the upside, German industrial group Siemens advanced 2.85% after its fourth quarter results beat expectations, while luxury goods maker Hermes International rose after reporting an 8% increase in third quarter like-for-like sales despite a challenging environment.

Zalando shares were 1.15% higher after the Swiss online retailer impressed with its quarterly sales growth.