By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets staged
broad-based losses on Tuesday, after some investors were
disappointed that the Bank of Japan refrained from taking fresh
steps to boost the economy.
Investors were also cautious as a hearing on the legality of the
European Central Bank's bond-buying program got under way in
Germany's constitutional court.
The Stoxx Europe 600 index lost 1.7% to 290.31, building on a
0.1% decline from Monday.
Shares of ICAP PLC gave up 3.6% after Credit Suisse cut the
interdealer broker to underperform from neutral.
Mining firms were also lower, as metals prices dropped across
the board. Shares of Anglo American PLC fell 3.9%, BHP Billiton PLC
(BHP) gave up 2.6% and Rio Tinto PLC (RIO) shaved off 2.2%.
For the broader European stock markets, investors took a hint
from Asia, where most bourses closed in the red after the Bank of
Japan's decision to keep its asset-buying and other policy elements
unchanged. The lack of action was widely expected, though some
market participants had hoped the central bank would extend its
low-price fund-supplying operation. The yen rose sharply against
the dollar after the decision and pushed stocks lower.
"By not announcing new easing measures today, BOJ has probably
done itself a favor in the long run. The economy is moving in the
right direction, and so far the correction in the financial markets
is not a threat to the recovery," analysts at Danske Bank said in a
note.
"It is important to understand that despite no announcement
today, BOJ is still easing aggressively. A massive amount of
liquidity will continue to be injected into the economy over the
coming months and monetary easing is still at an early stage," they
added.
In the U.S., stocks opened with sharp losses, as worries the
Federal Reserve will begin to taper its quantitative easing program
continued to haunt investors.
Back in Europe, the ECB's Outright Monetary Transactions program
was in the spotlight, as a two-day court hearing got under way in
Germany's constitutional court. The hearing focuses on the
legitimacy of the program, which the Bundesbank and several
politicians say undermines central bank independence and infringes
on a ban of monetary financing. See: High Noon for the euro in
Karlsruhe court
ECB President Mario Draghi said in an interview with German
television that "not a single cent has been spent" on the program,
but just the existence of such a mechanism is mainly responsible
for the easing fears of the euro zone breaking up. Read: Just say
no to ECB bond-buying: Buba chief
After the OMT announcement last summer, government bond yields
for struggling euro-zone countries such as Spain and Italy have
come down significantly, while the stock Stoxx 600 in May closed
higher for a 12th consecutive month.
Most indexes, however, tanked on Tuesday, with Greece's Athex
Composite down 5.2% at 891.10. Reuters reported that the country
will miss its asset sale target by about 1 billion euros ($1.3
billion) this year, after Russian energy giant Gazprom withdrew its
interest in Greece's natural gas firm DEPA on Monday. See: That
hissing noise out of Greece could mean trouble for the euro
zone
Germany's DAX 30 index dropped 1.6% to 8,175.95 on Tuesday,
weighed by Deutsche Bank AG (DB), down 2.1%.
France's CAC 40 index gave up 1.8% to 3,796.49, while the U.K.'s
FTSE 100 index slid 1.6% to 6,296.57.
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