UKX FTSE 100 Index

By Carla Mozee, MarketWatch

Germany business climate index falls

Stock markets across Europe dropped sharply Thursday, keying off a reversal of gains for Wall Street in the prior session. The U.S. stock losses came after minutes from the Federal Reserve's meeting last month suggested more interest-rate hikes are in the pipeline.

A downbeat reading on German business sentiment added to the sour investing mood across the continent,as traders waited for the release of minutes from the European Central Bank's meeting in January.

How markets are moving

Germany's DAX 30 index slumped 1.1% to 12,335.18 after that downbeat data, while the broader Stoxx Europe 600 index fell 1% to 377.44.

France's CAC 40 lost 0.6% to 5,266.83, and the U.K.'s FTSE 100 slid 1.1% to 7,202.18.

(http://www.marketwatch.com/story/european-stocks-struggle-as-hsbc-bhp-billiton-updates-disappoint-2018-02-20)The euro bought $1.2288, little changed from $1.2286 late Wednesday in New York.

The yield on the 10-year German bond fell 1 basis points to 0.70%, according to Tradeweb. Yields fall when prices rise.

What's driving markets

European equities followed U.S. stock futures lower early Thursday (http://www.marketwatch.com/story/dow-futures-slide-more-than-100-points-as-fed-driven-jitters-persist-2018-02-22). U.S. stocks retreated from a rally Wednesday (http://www.marketwatch.com/story/dow-futures-inch-lower-as-investors-brace-for-fed-minutes-2018-02-21) after minutes of the Fed's January meeting (https://www.federalreserve.gov/monetarypolicy/fomcminutes20180131.htm) showed officials see an "increased likelihood" of further interest rate hikes, heightening prospects for a rate rise in March. Policy makers now see the U.S. economy as getting stronger than it was at the end of 2017.

That news helped push the U.S. 10-year Treasury note yield up closer to the 3% mark, and buoyed the U.S. dollar . In turn, the stronger greenback pulled down prices of dollar-denominated commodities such as copper , gold and oil (http://www.marketwatch.com/story/oil-prices-slump-as-dollar-gets-boost-from-hawkish-fed-minutes-2018-02-22) , which then drove a drop for shares of producers of metals and oil.

Economic data

The minutes for the European Central Bank's meeting in January are scheduled for release at 12:30 p.m. London time, or 7:30 a.m. Eastern Time.

The Ifo survey out earlier in the session showed German businesses were less enthusiastic about current conditions, although that particular indicator still notched its second-highest level since 1991. The business climate index fell to 115.4 points (http://www.marketwatch.com/story/german-business-euphoria-fades-in-february-ifo-2018-02-22) in February, below the 117.0 points expected from a FactSet consensus poll of analysts.

The U.K.'s Office for National Statistics revised its estimate of U.K. GDP growth (https://www.marketwatch.com/story/uk-economy-lagged-more-than-thought-in-2017-2018-02-22https:/www.marketwatch.com/story/uk-economy-lagged-more-than-thought-in-2017-2018-02-22) in the fourth quarter down to 1.4%, from 1.5%, year on year. The shutdown of a major oilfield for repairs in December hit oil-and-gas production harder than first believed, the ONS said.

What strategists are saying

"Despite some [Fed] members advising patience, most analysts forecast a possible shift from three to four rate hikes in 2018. [A] March rate hike became imminent after the release of the minutes," said IronFX senior research analyst Peter Iosif in a note.

"The December minutes indicated that the ECB could relook at its forward guidance in early 2018 which encouraged market participants to believe a rate rise could be on the cards sooner rather than later. Today, investors will be watching closely to see if the ECB policy makers have focused more closely on this potential policy shift," wrote City Index's senior market analyst Fiona Cincotta.

Stock movers

Barclays shares (BCS) surged 5.2% after the bank said it would more than double its dividend next year (http://www.marketwatch.com/story/barclays-swings-to-loss-vows-to-double-dividend-2018-02-22-34852558) even as the bank swung to a full-year loss of GBP1.9 billion ($2.64 billion).

Topping the Stoxx 600, Genmab A/S shares (GEN.KO) soared 14% as the Danish biotech firm posted a 30% rise in 2017 revenue, mainly driven by higher royalties of its Darzalex blood cancer drug.

Anglo American PLC shares (AAL.LN) dropped 3.9% after the miner posted 2017 net profit of $3.17 billion (http://www.marketwatch.com/story/anglo-american-profit-almost-doubles-in-2017-2018-02-22), missing the $3.25 billion consensus estimate from FactSet.

British American Tobacco PLC (BATS.LN) fell 4.7%. The maker of Lucky Strike and Dunhill cigarettes said its pretax profit increased more than fourfold in 2017, on gains related to the acquisition of Reynolds American Inc. and credits related to U.S. tax reform. Volume of sales of cigarette and tobacco-heated products fell 2.6%.

Moneysupermarket.com Group PLC shares (MONY.LN) tumbled 18%, leading losses on the Stoxx 600, after the price-comparison company warned that while pretax profit for 2017 rose on higher revenue that it expects to grow more slowly in 2018 than anticipated (http://www.marketwatch.com/story/moneysupermarketcom-2017-profit-up-warns-on-2018-2018-02-22).

(END) Dow Jones Newswires

February 22, 2018 06:01 ET (11:01 GMT)

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