European stocks fall on Fed rate hike talk, weak China data

European stocks edged lower in morning trade after minutes from the U.S. Federal Reserve’s September meeting raised expectations of a December interest rate hike and weak China trade data weighed on investor sentiment.

The pan-European STOXX 600 was down 1.1 percent.,

Despite not hiking rates in September, Fed minutes on Wednesday showed that three members of the Federal Open Market Committee dissented and called for a rate hike.

Those in favor of hiking rates worried that waiting too long would push the country into recession.

The market is largely anticipating the Fed to raise interest rates later this year, with fed funds futures pricing in a more than 65 percent probability for a hike in December, but just 20 percent for November, according to RBS.

China trade data drags down miners

Commodity stocks were under pressure due to a number of factors. Firstly, investor sentiment was dampened by a fall in oil price after OPEC reported that its oil production rose in September to its highest level in eight years, despite the oil cartel potentially planning to cut output. The oil and gas sector was trading lower as a result. Tullow Oil was an exception with shares trading in the black after Morgan Stanley raised its outlook on the stock.

And in Asia trade, data showed China’s exports tumbled nearly 10 percent year-on-year in dollar-terms, and imports dipped 1.9 percent from the previous year.

This dragged down basic resource stocks with BHP Billiton and Rio Tinto feeling extra pressure after Citigroup cut its outlook on both stocks from “neutral” to “sell”.

Unilever in spat with Tesco

Meanwhile, Unilever shares were in the red despite the company reporting a 3.2 percent rise in sales in the third quarter. The negative sentiment towards the stock comes as Tesco, Britain’s largest supermarket chain, pulled a number of Unilever products from its website over price increases. Tesco shares were also sharply lower.

Broker downgrades and upgrades also moved stocks on Wednesday morning. Standard Life was down nearly 4 percent after Barclays cut its price target for the stock. U.K. security firm G4S was near the top of the STOXX 600 after RBC raised its price target.

Italian banks in focus

The Italian banks are also back in focus for investors. Unicredit was trading lower after it sold a 20 percent stake in its online broker business FinecoBank in a move that raised 552 million euros ($618 million).

Meanwhile, Italian bank rescue fund committed to invest up to 1.6 billion euros in Banca Monte dei Paschi di Siena to help with the securitization of bad loans at the troubled lender.

Source: CNBC