Europe close: ECB pours cold water on expectations of policy shift

The Stoxx Europe 600 index drifted 0.24% lower to 387.80 with miners leading the losses as metal prices fell. Germany’s DAX lost 0.23% to 12,443.79 and France’s CAC was 0.31% weaker at 5,271.70.

A gauge of Basic Resource companies' shares within the Stoxx 600 lost 2.75%, while another linked to lenders' shares dropped 0.88%.

Meanwhile, Brent crude was down 2.31% to $50.65 per barrel and West Texas Intermediate fell 2.5% to $48.42, following news that two Libyan oilfields with a combined putput of 390,000 barrels a day had restarted production.

Traders at Sucden Financial cited the drop in oil prices which triggered sell-stops on crude and gains for the US dollar as drivers of the weakness in Basic Resources, with losses for banks attributable to fading prospects of a hike in the ECB's deposit rate.

ECB chief Mario Draghi sounded a more confident note on the euro area economy, but cautioned that risks from overseas had increased even as underlying inflation was only seen rising gradually over the medium-term.

"The risks surrounding the euro area growth outlook, while moving towards a more balanced configuration, are still tilted to the downside and relate predominantly to global factors," said Draghi.

One source-based report prior to Thursday's meeting had indicated that many within the ECB Governing Council were mulling dropping a small hint in June of an upcoming shift in the policy stance.

Yet according to Draghi no such discussions took place today, sending the single currency lower by 0.30% to 1.0871.

Unperturbed, Philippe Gudin and Antonio Garcia Pascual at Barclays Research told clients: "In June we expect a change to a less dovish and more symmetric forward guidance that would open the door for depo rate hikes in 2018. In particular, we would expect modifications possibly to both the forward guidance on rates and on QE by removing the explicit reference in the statement to a scenario with lower rates and/or higher QE."

Dr. Howard Archer, chief European + UK economist at IHS Markit believed any change would have to wait until after the next German elections.

Earlier in the day, data revealed that consumer optimism in Europe’s largest economy was on the rise. GfK’s consumer confidence index rose to 10.2 in May from 9.8 the month earlier and was ahead of the 9.9 reading expected.

Meanwhile, a lack of detail meant the Trump administration's US tax announcement on Wednesday failed to get investors excited. Corporation tax is to be slashed to 15% from 35%, the seven tax brackets will be reduced to three and the alternative minimum tax would be cut, with nearly all of the current tax deductions eliminated.

In corporate news, Deutsche Bank fell 3.28% after the lender missed revenue expectations but posted a rise in profit.

Deutsche Lufthansa dropped 5.21% despite the German airline swinging to a €25m first-quarter profit.

Bayer AG gained 4.12% after the German pharmaceutical posted 38% rise in first quarter profit and raised its outlook for the year.

Total slipped 1.17% despite reporting a 56% jump in first quarter profits to €47.29.