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European shares open lower before ECB meeting

European shares fell on Thursday in cautious trade after the U.S. Federal Reserve sounded slightly hawkish overnight and ahead of a European Central Bank meeting at which it will debate the end of its huge asset purchases.

By 0812 GMT, the pan-European STOXX 600 <.STOXX> index was down 0.5 percent, while Britain’s FTSE <.FTSE> was down 0.5 percent and Germany’s DAX <.GDAXI> fell 0.4 percent.

The European Central Bank will debate whether to end its huge asset purchases by year-end, in what would be its biggest step towards dismantling crisis-era stimulus credited with pulling the euro zone economy out of recession.

Some investors said they did not expect the ECB to announce any decision on Thursday but rather wait for the July meeting to better asses the impact of an economic slowdown in the region.

“Once again ECB President Mario Draghi will have to be at his dextrous best at buying the ECB time when it comes to verbalising the likely differing opinions on the timing of an exit strategy… given current weakness in some of the recent data,” said Michael Hewson, analyst at CMC Markets.

All sectors traded in negative territory with basic resources stocks <.SXPP>, down 1.6 percent, leading the fall following weaker-than-expected data from big metals consumer China that sent copper prices near one-week lows.

Shares in miners Glencore , Rio Tinto and BHP Billiton fell between 1.6 and 2.4 percent.

Bucking the broader weakness were shares in heavyweight drugmaker GSK, up 0.8 percent. Investors welcomed news that its two-drug treatment for HIV met its main goal in late stage studies – a big win after regulators warned of possible birth defects from one of the two drugs.

Rolls-Royce was another bright spot, up 2.7 percent, after saying it would save 400 million pounds a year by cutting 4,600 jobs in its latest attempt to simplify the business and generate more cash.

“After spending around four and half years in purdah, an incremental £400 million of FCF (free cash flow)would allow Rolls-Royce to take a significant step toward meeting its financial targets,” Jefferies analysts said.

“That should then mean Rolls-Royce can make an adequate annual return to shareholders through the dividend,” they added.

Aveva was the biggest gainer on the STOXX, up 11.9 percent to a record high after strong results from the British engineering software company.

On the DAX, Volkswagen fell 0.4 percent after the carmaker was fined one billion euros over diesel emissions cheating.

Still in Germany, leasing company Grenke announced a cash capital increase of up to 200 million euros. Its shares were among the leading losers on the STOXX, down 5.7 percent.

Source: Reuters (Reporting by Danilo Masoni; Editing by Toby Chopra)

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