Europe midday: Stocks turn lower as euro gains ground against dollar

European stocks reversed opening gains to trade lower as the euro advanced against the dollar, which took a hit from the Federal Reserve’s dovish stance on Wednesday.

At midday, the benchmark Europe Stoxx 600 index was down 1.2%, Germany’s DAX was 1.8% lower and France’s CAC 40 was off 1.5%. The euro, meanwhile, was up just over 1% versus the dollar.

At the same time, London’s FTSE 100 was down 0.3% after the Bank of England left interest rates and its asset purchase programme on hold at 0.5% and £375bn, as widely expected.

Oil prices were in the black, with West Texas Intermediate 1.6% firmer at $39.07 a barrel and Brent crude up 1.3% at $40.85.

On Wednesday, the Federal Reserve left the target range for the benchmark federal funds rate unchanged at 0.25% to 0.5%, as widely expected, but the accompanying statement was much less hawkish than expected.

The Fed, which lifted interest rates for the first time in nearly a decade back in December, said rate rises this year would be more gradual than previously thought, with two on the cards versus the four projected at the end of last year.

"Proceeding cautiously will allow us to verify that the labour market is continue to strength given the economic risk from abroad," said chairwoman Janet Yellen.

The Fed's decision was in contrast to recent moves from the Bank of Japan and the European Central Bank, both of which took interest rates into negative territory.

Stocks had opened in the black but the gains soon evaporated as the dollar was knocked by the Fed’s dovish stance, with a stronger euro weighing on European exporters.

“The economic projections that accompanied the release betrayed the Fed’s dovish turn. Forecasts for inflation were significantly worse than the last projections in December, and member “dot plot” estimations of interest rates had largely moved below 1%. The Fed has backed down from its earlier optimism and despite to raise rates above 1% this year, and last night’s releases made this very clear,” said Monex.

The euro also got a boost from data showing inflation in the Eurozone rose more than expected in February.

On a month-on-month basis, the consumer price index was up 0.2% versus a consensus estimate of a 0.1% rise and a big reversal from the 1.4% drop in January.

On the year, CPI remained in negative territory, at -0.2%, as forecast, according to the figures released by Eurostat.

The core rate, which strips out volatile items like fuel and food prices, printed at 0.8%, beating forecasts of 0.7%.

In corporate news, Deutsche Lufthansa slid after it forecast weak earnings growth for 2016.

Anglo American surged in London as metals prices pushed up, while Rio Tinto rose on news chief executive Sam Walsh will retire in July after three years in the job.

Cement maker LafargeHolcim rallied after its full-year earnings beat analysts’ expectations.

Still to come on the data front in the US, the Philadelphia Fed survey, initial jobless claims and the current account balance are at 1230 GMT.