Europe open: Equities in the red as energy and mining issues drop

European equity markets fell in early trade, with basic resources and energy stocks suffering the brunt of the losses as metals and oil prices declined.

At 0845 GMT, the benchmark Stoxx Europe 600 was down 0.9%, Germany’s DAX was 0.8% lower and France’s CAC 40 was off 1.2%.

At the same time, oil prices were in the red 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 1.5% to $39.21 a barrel while Brent crude was 0.9% weaker at $40.12.

The Stoxx 600 oil and gas index fell 1.4%, while the sub-index for basic resources was down nearly 3% as metals prices slid.

“There’s a general feeling that the recent equity market rally has gone far enough with many major indices now back to where they started at the end of 2015,” said David Morrison, senior market strategist at SpreadCo.

“With the long Easter weekend coming up, it looks as if some position-squaring is in order. This has been compounded by this week’s comment-torrent from a rash of Fed-heads. We’ve now had four regional Federal Reserve presidents come out in favour of tighter monetary policy with the odds on an April hike shortening dramatically. The dollar has rallied as a result, taking the wind out of the recent commodity rally.”

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.

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.