Europe close: Stocks slip ahead of US Fed rate decision
Traders opted to be play it safe on Monday, keeping their cards close to their chests ahead of the US central bank's policy announcement on Wednesday.
Ahead of Fed chair Janet Yellen's last press conference, the benchmark Stoxx 600 dipped 0.05% to finish at 389.05, alongside a retreat of 0.23% or 30.05 points for the German Dax to 13,123.65 and a retreat of 0.23% or 12.26 points to 5,386.83 for the Cac-40.
US tax reforms were also in focus, ahead of a speech by President Donald Trump, on Wednesday, in which he was expected to make a final case for it. On the preceding Sunday, Trump had tweeted "getting closer and closer on the tax cut bill […] House and Senate working very hard and smart."
In anticipation of those cuts, which he expected would add 0.3 percentage points to the rate of US GDP growth in 2018 to reach 2.7% and expectations for global GDP growth to pick-up from a 2.9% pace in 2017 to 3.2% in 2018, Gregory Daco, chief US economist at Oxford Economics, projected the Fed would hike interest rates three times over the course of the following year.
Despite the looming tax hikes, strategists at JP Morgan stuck to their constructive view on the market, reiterating their 'overweight' stance on global equities heading in 2018, telling clients economic growth was likely to remain above trend, that the impact of US tax cuts was not yet priced-in and that the bounce in oil would boost earnings too.
In the same research note, JP Morgan called for a 'rotation' out of 'growth' and towards a 'value' style.
Trade and politics were also on traders' minds, ahead of the European Union summit on Thursday at which policymakers were expected to give the 'green light' to the start of trade negotiations between London and Brussels.
Acting as a backdrop, on Monday morning the People's Bank of China reported that money supply growth, known as M2, accelerated from a 8.8% year-on-year clip in October to 9.2% for November (consensus: 8.9%).
Also in the background, Fed funds futures had been creeping higher and as of Monday morning were discounting a 61.7% probability of two more 25 basis point interest rate hikes from the US central bank in 2018.
Back in Europe, the economic calendar was light at the start of the week.
According to ISTAT, in volume terms Italian retail sales dropped by 1.1% month-on-month in October, undershooting forecasts for a dip of 0.1% by a wide margin.
As an aside, in an interview published on Sunday by Il Sole 24 Ore, International Monetary Fund chief Christine Lagarde said Italy must carry out deeper reforms as regards its jobs market, financial sector and facing up to the overhang of bad loans.
In parallel, the French central bank's industrial sentiment gauge was unchanged in November at 106.
Stateside, chief technical negotiators from the US, Canada and Mexico were due to meet later for discussions around NAFTA.
On the corporate side of things, Lufthansa posted a 32% jump in passenger traffic in November versus a year earlier, when it suffered six days of strike.
Elsewhere, La Repubblica reported that Unicredit was mulling a tie-up with a foreign rival in order to bulk up its footprint overseas.