MILAN/FRANKFURT: Eurozone 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 eurozone index and Germany's DAX both fell as much as 1% before paring losses to close 0.2% and 0.3% lower respectively, with oil stocks jumping on a surge in crude prices.
An index of euro zone banks ended down 2.1% despite the ECB agreeing to provide lenders with even more ultra-cheap liquidity. Spain's lender-heavy IBEX index 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. At 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%.
The European STOXX 600 index was down 0.4%. Rising prices of copper and iron ore lifted Europe's materials index 0.3% to near 8-month highs. London's blue-chip index, heavy with oil and commodity-linked stocks, closed up 0.5%, further helped by a pound hammered by Brexit trade deal uncertainty.
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