Central banks leave markets seeing red

LONDON: Updates from the US Federal Reserve and the Bank of England left markets on the back foot Thursday as investors weighed their messages on the outlook for growth and monetary policy.

A sharp drop in oil prices that followed data showing a surge in US supplies also hit energy stocks.

If Asian stock markets mostly closed higher, European markets mostly moved lower as did Wall Street, after having retreated on Wednesday after the Federal Reserve dented prospects for a possible cut in US interest rates.

Traders were jolted by Fed boss Jerome Powell's assessment Wednesday of recent weak US inflation as being only "transitory".

The comments came after the Fed's latest policy meeting and sank faint hopes that the US central bank would announce a rate cut later in the year.

It went also against a call from US President Donald Trump to ease borrowing costs to help bolster the economy.

Briefing.com analyst Patrick O'Hare said "the stock market seems to be licking its wounds after being told yesterday by Fed Chair Powell that the FOMC (monetary policy committee) doesn't see the need for a rate cut, because it suspects the factors pushing inflation rates lower are transitory".

Meanwhile, the Bank of England on Thursday raised its forecast for UK economic growth this year to 1.5 percent from 1.2, as stockpiling offsets lower business investment elsewhere ahead of Brexit.

Analysts were split whether the BoE sent signals it could raise its main interest rate from 0.75 percent before the current market expectations of a hike by the end of 2021.

Elsewhere, there was optimism over the China-US trade talks, with Treasury Secretary Steven Mnuchin describing a high-level two-day meeting in Beijing as "productive".

Chinese negotiators head to Washington next week for another round, with CNBC citing unnamed sources as saying a deal could be signed at the end of next week.

Oil prices meanwhile extended losses Thursday after data showed US crude inventories and production had jumped.

"Oil has sold-off on the back of yesterday's Energy Administration Information report, which showed that US oil inventories surged by 9.9 million barrels -- it's largest since September 2017," noted David Madden, analyst at CMC Markets UK.

Markets are also looking ahead to the US government jobs report for April out Friday. Analysts expect the US economy added another 200,000 jobs last month while the unemployment rate held steady at 3.8 percent.

- Key figures around 1530 GMT -

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London - FTSE 100: DOWN 0.5 percent at 7,351.31 points (close)

Frankfurt - DAX 30: FLAT at 12,345.42 (close)

Paris - CAC 40: DOWN 0.9 percent at 5,538.86 (close)

EURO STOXX 50: DOWN 0.8 percent at 3,488.11

New York - Dow: DOWN 0.6 percent at 26,269.56

Hong Kong - Hang Seng: UP 0.8 percent at 29,944.18 (close)

Shanghai - Composite: Closed for holiday

Tokyo - Nikkei 225: Closed for holiday

Euro/dollar: DOWN at $1.1174 from $1.1192 at 2050 GMT

Pound/dollar: DOWN at $1.3034 from $1.3045

Euro/pound: UNCHANGED at 85.79 pence

Dollar/yen: UP at 111.47 from 111.16

Oil - Brent Crude: DOWN $2.12 at $70.06 per barrel

Oil - West Texas Intermediate: DOWN $2.49 at $61.11