Europe midday: Stocks extend losses as commodities pace the decline

European equity markets extended early losses on Thursday, with basic resources and energy stocks under the cosh as metals and oil prices declined.

At midday, the benchmark Stoxx Europe 600 was down 1.3%, Germany’s DAX was 1.5% lower and France’s CAC 40 was off 1.9%.

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 2.3% to $38.88 a barrel while Brent crude was 2.2% weaker at $39.58.

The Stoxx 600 oil and gas index fell 2.1%, while the sub-index for basic resources was down 3.5% as metals prices dropped.

“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.