UPDATE 3-Euro zone stocks drop as ECB warns of slowing growth next year

  • Reuters
  • Stock Market News
UPDATE 3-Euro zone stocks drop as ECB warns of slowing growth next year
Credit: © Reuters.

(For a live blog on European stocks, type LIVE/ in an Eikon news window)

* ECB delivers stimulus as expected

* Euro zone banks drop

* Johnson, von der Leyen push trade deal deadline to Sunday

* EU summit begins; 1.8 trillion euro package eyed

* Oil, basic material stocks lead gains (Updates to close)

By Susan Mathew

Dec 10 (Reuters) - Euro zone stocks hit a two-week low on Thursday, with banks taking a knock after the European Central Bank forecast a slower rebound in growth next year even as it rolled out more stimulus measures to support the bloc's pandemic-hit economy.

The STOXX euro zone index .STOXXE and Germany's DAX .GDAXI both fell as much as 1% before paring losses to close 0.2% and 0.3% lower respectively, with oil stocks .SXEP jumping on a surge in crude prices. O/R

An index of euro zone banks .SX7E ended down 2.1% despite the ECB agreeing to provide lenders with even more ultra-cheap liquidity.

Spain's lender-heavy IBEX index .IBEX led declines in the region, down 0.6%.

The ECB increased the overall size of its Pandemic Emergency Purchase Programme (PEPP) by 500 billion euros, in line with market expectations and also extended the scheme by nine months to March 2022. a press conference following the decision, ECB President Christine Lagarde said the bank expects euro zone GDP to expand by 3.9% next year, slower than its September forecast of 5%. But growth is seen at 4.2% in 2022, above a previous projection of 3.2%. bankers have flooded bank balance sheets, but those funds are not flowing through the economy normally. In other words, the quantity of money is up but velocity is way down, muting the economic impact," said Aaron Anderson, SVP of Research at Fisher Investments.

The European STOXX 600 index .STOXX was down 0.4%.

Rising prices of copper and iron ore lifted Europe's materials index .SXPP 0.3% to near 8-month highs. MET/L IRONORE/

London's blue-chip index .FTSE , heavy with oil and commodity-linked stocks, closed up 0.5%, further helped by a pound hammered by Brexit trade deal uncertainty. GBP/

A meeting between British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen on Wednesday yielded no breakthrough with the leaders giving themselves until the end of the weekend to seal a new trade pact after failing to overcome persistent rifts. $1 trillion in annual trade, currently free from tariffs and quotas, is at stake if there is no agreement by the end of the month when Britain leaves the bloc.

Meanwhile, the European Union summit began on Thursday with leaders likely to unblock a stalled 1.8 trillion euro ($2.18 trillion) package as Poland and Hungary appeared to be edging toward an agreement on the EU budget. = 0.8270 euros)

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