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Europe: Shares end winning streak as banks, energy stocks fall

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[LONDON] European shares broke their three-day winning streak on Thursday as banks fell following a set of cautious minutes from the US Federal Reserve, and energy stocks also weighed on a busy day for company results.

The pan-European Stoxx 600 index fell 0.6 per cent, while euro zone blue chips declined 0.7 per cent.

Britain's FTSE 100 fell 0.6 per cent, and Germany's DAX dropped 0.5 per cent.

Minutes from the Federal Reserve's latest meeting showed policymakers were growing more cautious about recent weak inflation, with some calling for a pause in interest rate hikes.

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European banks, which benefit from higher interest rates, were the worst-performing sector, down 1.6 per cent with Deutsche Bank and Commerzbank leading the DAX lower with losses of 2.8 to 3 per cent.

Societe Generale, Credit Agricole and BNP Paribas were the top drags on France's CAC, down 1.6 to 2.3 per cent.

Minutes from last month's European Central Bank meeting, which revealed some rate-setters were concerned about an excessive rise in the euro, sent the currency to a three-week low, briefly boosting the Stoxx 600 into the black, though the index rapidly retreated again.

The euro's recent rally has triggered concern about European stocks, many of which stand to lose from a stronger currency, though JP Morgan strategists have said investors may be overplaying its impact on earnings.

All eyes were turning to ECB chief Mario Draghi's speech at the Jackson Hole central banker meeting next week.

"Since the presentation in Sintra when he was much more dovish, the euro has increased a lot more, so we think we should get a dovish tilt from him," said Ricardo Garcia, head of European macroeconomics at UBS Wealth Management's chief investment office.

Energy stocks, the worst-performing European sector so far this year, were also down one per cent.

Earnings updates drove sharp moves, with Swiss toilet and plumbing supplies maker Geberit tumbling 5.8 per cent after posting weaker-than-expected second quarter results.

Wienerberger plummeted 9.6 per cent after the Austrian brickmaker flagged a bleaker outlook for the UK construction market, which accounts for 10 per cent of its full-year outlook.

Drugmaker Hikma dropped 10 per cent and Vestas Wind fell more than 7 per cent after their updates.

Results boosted shares in Swiss health care firm Straumann to a record high, up 11.3 per cent after its first half results beat expectations.

"We do not think anyone doubts Straumann's revenue growth potential. The company is certainly living up to very high expectations in this regard having posted 14 per cent organic growth in H1 2017, something those who can remember the dark days of 2010-12 can still scarcely believe," analysts at Berenberg said in a note.

They predicted attention would turn to Straumann's margins and profits.

Danish hearing aid producer GN Store Nord was also up 6.3 per cent after its second-quarter report.

So far 86 per cent of MSCI Europe firms have given second-quarter updates, of which 60 per cent have either met or beaten analysts' expectations, according to Thomson Reuters data.

Overall, this points to earnings growth of more than 24 per cent for the quarter, compared with the same period last year.

REUTERS