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European stocks trim gains as ECB meeting looms

November 13th, 2015

European stocks held to thin gains Tuesday, with investors appearing reluctant to make major moves ahead of the European Central Bank’s policy announcement. The Stoxx Europe 600 trimmed its advance to 0.1% at 385.94 as basic material , telecom and industrial shares pulled lower. Among telecoms, TeleAB2  slipped 0.2% following a ratings downgrade to neutral from buy at Nomura.

Linde AG  also capped the Stoxx 600’s gain, with shares of the industrial-gases producer sliding 13% after the company cut its 2017 operating profit forecast. The company also said its engineering division will contribute less than expected to operating profit as low oil prices are holding customers back from investing.

On national indexes, Germany’s DAX 30 turned lower by 0.2% to 11,365.78 and France’s CAC 40  switched into the red, losing 0.3% to 4,945.18.

Stocks weren’t lifted higher after data firm Markit confirmed a November reading of manufacturing activity in the eurozone at 52.8, with the reading meeting widely held expectations. The euro  edged down to $1.5087 following the PMI report, but it was still higher than late Monday’s level at $1.5068.

Eurozone PMI data were “fairly good” in part as “Italy seems to be undergoing something of a mini-boom over the past number of months as its PMI hit a 4-month high,” said Brenda Kelly, head analyst at London Capital Group, in a note. While stock gains on Monday suggest there’s “bullish sentiment out there” many investors don’t seem willing “to pre-commit ahead of the ECB and, of course, the nonfarm payrolls later this week,” she said.

The nonfarm-payrolls report due on Friday is seen as an important factor in determining the timing of the first U.S. rate hike in nearly a decade. The Stoxx 600 ended Monday’s session up by 0.5%, extending its November gain to 2.7%.

The European Central Bank will release its policy decision Thursday, and ECB President Mario Draghi has stressed the central bank is willing to do more to boost inflation and growth. Economists widely expect the ECB to say it will purchase government bonds beyond its plan to buy them through September 2016. Some economists are also looking for a cut to the deposit rate. In London, the FTSE 100 rose 0.4% to 6,383.76, with bank stocks rising as all seven of the country’s biggest banks passed the Bank of England’s annual health check. The central bank said it would lessen pressure on U.K. banks to hold more capital.

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