European shares slip on US rate hike prospects; banks outperform

European shares fell on Thursday as weaker oil and metals prices put pressure on commodities stocks and concern mounted that US interest rates would be raised soon. However, bank stocks outperformed, helped by the prospect of rising US rates. Minutes from the Federal Reserve's April meeting showed most of its policymakers thought a June increase would be appropriate if the US economy continued to improve.
"This more-than-expected hawkish tone from the minutes is sending European shares lower," Market Securities' chief European strategist, Stephane Ekolo, said, except for "the banking sector, a clear winner in case the Fed start raising rates sooner than what the market anticipated". Deutsche Bank rose 1.3 percent. A trader said Deutsche would be one of the biggest beneficiaries among European banks if the Fed raises rates, thanks to its US business.
The pan-European FTSEurofirst 300 index ended down 1.2 percent. The basic resources sub-index fell 2.6 percent, while the energy sub-index dropped 2.7 percent. Copper prices extended losses, weighed down by a stronger dollar, the potential for a US rate increase and worries about lacklustre demand. The stronger dollar also put pressure on crude oil prices.
Bayer fell more than 8 percent, making it the top loser in the FTSEurofirst, after the drugs and chemicals group made a bid for Monsanto. Traders said the move was likely to keep Bayer shares under pressure in the short term. UBS Global Asset Management said it was "deeply concerned" about the burden on Bayer's finances from a take-over, saying it would prefer the companies to agree a joint venture or a nil-premium merger.
Travel and leisure stocks fell 1.5 percent after an Egyptair flight carrying 66 passengers and crew disappeared on a flight from Paris to Cairo. Shares in British holiday company Thomas Cook slumped 19 percent, reaching their lowest since March 2013, after it said tourists were avoiding Turkey, its second-most popular destination last year. Accor, TUI and InterContinental Hotels fell 1.6 to 3.4 percent. Among airline stocks, Aeroports De Paris fell 1.8 percent. Air France KLM fell 1 percent and BA-owner IAG 2.3 percent. Airbus rose 0.2 percent.