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European stocks retreat after rally

[LONDON] Europe's main stock markets fell Thursday as a recent rally came to a halt following losses in Asia, triggered in part by US rate-rise fears.

London's FTSE 100 index of leading shares dropped 1.18 per cent to close at 6,155.81 points as the Bank of England cut its growth forecast for Britain and warned of global "headwinds" from the slowdown in China and other emerging economies.

In the eurozone, the CAC 40 in Paris fell 1.46 per cent to finish at 4,596.53 points and Frankfurt's DAX 30 lost 0.90 per cent to 10,210.44.

"The relief rally in European stocks looks to have petered out after three days," said CMC Markets UK analyst Jasper Lawler.

"This was always the risk, with a lot of remaining uncertainties surrounding China's economy and government policy," he added.

The euro meanwhile edged up to $1.1266 from $1.1205 late on Wednesday in New York.

The Bank of England said Thursday while worries about Greece had reduced "at least in the near term... concerns about China and other emerging economies had grown." A case in point is Brazil where Sao Paulo's stock market opened 2.2 per cent lower Thursday on Standard and Poor's decision to cut the Brazilian sovereign credit rating to junk status.

The New York-based agency cut Brazil's long-term rating after markets closed Wednesday, signaling a loss of confidence in the country, which has just entered recession and where the government is struggling with mushrooming debt.

Asian markets set the tone Thursday, with a mixed reading on Chinese inflation and concerns about a US interest rate rise setting traders on edge.

The Hang Seng Index in Hong Kong retreated 2.57 per cent while Shanghai's benchmark composite index lost 1.39 per cent.

Tokyo shares ended down 2.51 per cent Thursday, a day after its biggest one-day jump in seven years.

While markets have been focused on Chinese economic data, next week's meeting of the US Federal Reserve looms with the potential of interest rate rises for the first time since 2006, taking them from the zero level that was set to boost the economy.

Rising US interest rates could cause huge shifts in funds around the world, as happened in 2013 when the Fed first hinted it wanted to raise rates.

Investors are watching closely whether the Fed begins to hike rates this month or holds off.

US stocks were slightly higher Thursday, after having ended down the previous day.

Near mid-day trade in New York, the Dow Jones Industrial Average had edged up 0.41 per cent to 16,320.28 points.

The broad-based S&P 500 added 0.32 per cent to 1,948.19, while the tech-rich Nasdaq Composite Index rose 0.58 per cent to 4,784.29.

The supermarket sector was in focus in European trading Thursday after British group Morrisons said it planned to shut 11 large stores alongside news of a slump in profits - one day after saying it would sell 140 convenience shops.

Shares in Morrisons slumped 2.84 per cent to close 170.90 pence while rivals Sainsbury's lost 1.85 per cent to 238.90 pence and Tesco declined 2.96 per cent to 185.55 pence.

French supermarket group Carrefour plunged 3.25 per cent to finish at 27.65 euros.

Morrisons and other leading British supermarket chains are trying to restructure to meet the challenge from low price rivals Aldi and Lidl.

Tesco, Britain's largest retailer, agreed Monday to sell its South Korean unit Homeplus to a consortium led by private equity firm MBK Partners for more than £4.0 billion.

Shares in supermarket groups fell even though UN data released on Thursday showed that the price of international food commodities slumped in August to their lowest level in almost seven years.

The Food and Agriculture Organization said the prices of almost all commodities measured in its Food Price Index dropped last month, including milk, vegetable oils, sugar and cereals.


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