UPDATE 2-Euro zone stocks hit by firm euro as Draghi shoos away hopeful doves

  • Reuters
  • Stock Market News
UPDATE 2-Euro zone stocks hit by firm euro as Draghi shoos away hopeful doves
Credit: © Reuters.

* STOXX 600 flat; Euro zone stocks down 0.2% as strong euro weighs

* Banks slide as ECB loan program not as generous as hoped for

* Renault drops after Fiat Chrysler ditches deal talks

* Danish stocks rise, country to see new government (Recasts, updates to close, adds graphic, quotes)

By Aaron Saldanha

June 6 (Reuters) - Euro zone shares underperformed their broader European peers on Thursday, hit by a stronger euro after the European Central Bank matched investors' expectations in keeping rates untouched but refrained from providing as dovish an outlook as hoped.

Euro zone equities .STOXXE fell 0.2%, while the pan-European STOXX 600 .STOXX marked time. A firmer euro trims the value of euro zone companies' overseas earnings when converted back to the common currency, hitting their overall profitability. FRX/

Germany's DAX .GDAXI shed 0.2%, while French stocks .FCHI fell 0.3%. London-traded equities .FTSE eked out a gain. .L

Thursday's performance trims the degree to which euro zone stocks have relatively outperformed the European benchmark in the quarter to date.

"It would have been very, very difficult for the ECB to out-dove the market and push yields even lower," said Andrea Iannelli, investment director at Fidelity.

"More importantly he did say rates are not going anywhere until 2020, potentially even longer… that doesn't really help banks.

European lenders .SX7P had a torrid day, flipping into negative territory and ending 1% lower, as the ECB did not detail as generous a cheap loan lending programme for banks as investors had expected. de Groot, Rabobank's head of macro strategy for the euro zone and ECB, told the Reuters Global Markets Forum the 10 basis point premium on the programme compared to the previous series was a signal the ECB is keen on making the banks view it more for liquidity than as a funding tool. equities .FTMIB edged up, although Italian lenders .FTIT8300 reversed early gains to slide 1.2% with UniCredit falling 1.1%, while Banco BPM dropped 2%.

Auto-makers and their suppliers .SXAP declined 0.9%, as Renault SA RENA.PA dived 6.4% after Fiat Chrysler Automobiles FCHA.MI walked away from an over $35 billion merger with the French carmaker. estate stocks .SX86P fell 2.2% as reports Berlin authorities were planning to impose a cap on rents hit German property firms Vonovia VNAn.DE and Deutsche Wohnen DWNG.DE to the tune of 4.7% and 7.7%, respectively. stocks .SX6P , considered a defensive sector, clocked the biggest gains in Europe as they rose 1.3%.

Stocks in Copenhagen .OMXC20 rose 1.6%. Mette Frederiksen, leader of the Social Democrats, said she would launch talks to form a government after a centre-left election victory put her on course to become the country's youngest ever prime minister. Eurozone stocks outperform broader European peers QTD

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