Europe close: Traders goose euro higher ahead of ECB meeting

News of continued political gridlock in the US saw traders goose the single currency higher ahead of the European Central Bank's next policy meeting, which in turn weighed on equity prices across the Continent.

According to the Wall Street Journal, overnight two more US senators had decided to change sides, derailing efforts to repeal and replace ex-president Obama's landmark Affordable Care Act.

For many observers, that was a necessary precursor to any fiscal stimulus and to an extent had been a factor behind expectations for higher interest rates from the US central bank, the Federal Reserve.

At the close, euro/dollar was advancing by 0.74% to 1.1562, but off an intra-day high of 1.1584, while the Stoxx 600 was down by 1.11% or 4.28 points to 382.58.

In parallel, the Dax was down by 1.25% or 156.77 points to 12,430.39 and the Cac-40 by 1.09% or 56.90 points to 5,173.27.

Commenting on the morning's news-flow, Michael Hewson, chief market analyst at CMC Markets UK said: "The US dollar tumbled further overnight pushing above 1.1500 against the euro as further splits in Republican ranks cast doubt on the ability of the US President to get his health care reforms off the ground which ergo suggest that any other reforms, such as tax become much less likely, either in the short term, as well as the long term.

"It would appear that the fractious nature of politics in both the US and UK is helping benefit the euro, and who would have predicted that a year ago."

Back in the euro area, the ZEW institute's economic sentiment gauge for Germany slipped by 1.1 points to 17.5 (consensus: 17.8).

"The outlook for the German economic growth in the coming six months continues to be positive," said ZEW president Professor Achim Wambach.

Lufthansa raised its profit target for 2017 on the back of a strong summer on its North American routes and robust economic conditions in Germany.

The same German carrier's low-cost unit, Eurowings was reportedly open to acquisitions, Handelsblatt reported.

Stock in Ericsson cratered after the phone equipment manufacturer said the company's turnaround would take time to implement.

Germany's Software AG boosted its full-year guidance for profits.

France's Gecina posted recurring first half net profits of €152.7m.

In Italy, Unicredit was in the news after selling €17.7bn-worth of bad loans to America's Fortress and PIMCO.