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 The pan-European FTSEurofirst stocks index dropped 0.5 percent, led
lower by financial shares, and is down about 9 percent so far this
year. Germany's Dax index fell by 0.4 percent while Britain's FTSE
100 lost 0.5 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan
slipped 0.5 percent, moving back toward a two-month low touched on
Tuesday.
But Japan's Nikkei stock index erased early losses and ended up 0.4
percent as the yen fell against the dollar.
The gloomy tone in stocks markets had been set in the U.S. markets.
The Dow Jones Industrial Average <.DJI> fell 1.2 percent on
Wednesday, its biggest one-day fall since Feb. 11, though this only
reversed Tuesday's 1.2 percent rise.
Disney missed earnings targets <DIS.N> and department store Macy's <M.N>
slashed forecasts, hammering the consumer sector. [.N]
"A slowdown in U.S. consumer spending is doubly concerning given how
much the U.S. economy relies on consumers hitting the shops and
spending their hard earned dollars," said Michael Hewson, chief
market analyst at CMC Markets in London.
At the same time, an auction of 10-year U.S. Treasury bonds saw
strong demand with the highest indirect bids on record, which can
come from governments, fund managers and insurance companies.
U.S. 10-year yields fell 1 basis point to 1.72 percent. German
10-year yields, the benchmark for euro zone borrowing costs, hit a
one-month low of 0.1 percent.
In currency markets, the dollar strengthened 0.2 against a basket or
currencies and 0.3 percent against the yen after an academic seen to
be close to Bank of Japan Governor Haruhiko Kuroda said the BOJ was
likely to expand its monetary stimulus soon.
Takatoshi Ito, a former senior finance ministry official, said the
BOJ, which introduced negative rates earlier this year, could act in
June or July.
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This follows a series of warnings from Japanese Finance Minister
Taro Aso that Tokyo would intervene to curb any excessive one-sided
gains in the yen.
"With policy easing speculation gaining ground and the Finance
Minister talking down the yen, it is clear they do not want a
stronger currency," said Niels Christensen, FX strategist at Nordea.
The yen was last at 108.75 to the dollar, having touched an 18-month
high of 105.55 on May 3.
The euro weakened 0.2 percent to $1.1406 and sterling fell a
similar amount to $1.4413 before a Bank of England policy meeting
and the release of new growth and inflation forecasts later on
Thursday.
The British economy has shown signs of weakening recently, with
money markets pricing in a chance of an interest rate cut by the end
of the year, while economists polled by Reuters have said growth
could be at risk if Britain votes to leave the European Union in a
referendum in June.
Oil prices held on to most of Wednesday's sharp gains, unfazed by
the gradual return of Canada's oil sands output. Brent crude was
last down 5 cents a barrel at $47.56, having rise nearly $3 on
Wednesday on a fall in U.S. crude inventories.
Copper prices pared earlier gains as the dollar found a firmer
footing. The metal was last up 0.3 percent at $4,721 per ton.
Investors were also watching Brazil, where the Senate was poised to
suspend President Dilma Rousseff prior to putting her on trial for
breaking budget laws.
The real was 0.1 percent stronger at 3.45 per dollar.
(Additional reporting by Lisa Twaronite in Tokyo, Jamie McGeever and
Anirban Nag in London; Editing by Toby Chopra and Raissa Kasolowsky)
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