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European stocks close lower after IMF calls for ECB stimulus

Key Points
  • The IMF said in a report Thursday that the euro zone economy faces rising risks from trade tensions, Brexit and Italy.
  • Federal Reserve Chairman Jerome Powell said on Wednesday that the central bank will "act as appropriate" to sustain expansion as "crosscurrents" are weighing on the economic outlook.
  • Meanwhile, the Bank of England's Financial Stability Report suggested on Thursday that British banks hold enough capital to cope with the simultaneous risks of a no-deal Brexit and a global trade war.

European stocks closed lower on Thursday after the IMF said the euro zone economy faces rising risks stemming from trade tensions, Brexit and Italy.

European Markets: FTSE, GDAXI, FCHI, IBEX

In a report published on Thursday afternoon, the International Monetary Fund (IMF) also called for fresh stimulus from the ECB.

"Directors agreed that monetary policy should remain accommodative until inflation is sustainably converging to the ECB's objective," it said. "They welcomed the recent extension of forward guidance to help achieve a sustained pickup in inflation. Targeted macroprudential policies could be used to address any financial stability risks."

The pan-European Stoxx 600 was in negative territory at the closing bell, with all major bourses in the red.

Stateside, the Dow Jones Industrial Average rallied to a record high on Thursday, lifted by health insurance stocks after the White House dropped a proposal to eliminate drug rebates.

Stocks on Wall Street were also lifted by Wednesday's testimony by Federal Reserve Chair Jerome Powell, which signaled that easier monetary policy could be implemented later this month.

Powell told the House Financial Services Committee in a prepared testimony on Wednesday that the central bank will "act as appropriate" to sustain expansion as "crosscurrents" are weighing on the economic outlook.

Back in Europe, the Bank of England's Financial Stability Report on Thursday suggested that British banks hold enough capital to cope with the simultaneous risks of a no-deal Brexit and a global trade war, but warned that a slide in overseas investment into some British assets due to Brexit does pose a risk to the wider economy.

France's Senate approved a tax on the revenues of tech giants like Google, Amazon and Facebook on Thursday, defying a warning from the U.S. Trade Representative Robert Lighthizer said Wednesday that President Donald Trump has ordered a probe into whether the planned "digital services" tax is an unfair trade practice that targets U.S. companies.

In corporate news, Deutsche Bank shareholders will have the opportunity to grill CEO Christian Sewing on how he plans to deliver on the German lender's revenue growth targets during a global roadshow. Sewing is seeking shareholder backing for a massive 7.4 billion euro ($8.4 billion) restructuring program. Deutsche Bank shares were up 0.9% on Thursday.

Swiss Re has suspended the $4.1 billion IPO (initial public offering) of its U.K. life insurance business due to market conditions. The reinsurance giant's stock pared early losses to end the session around the flatline.

In terms of individual stock performance, German packaging manufacturer Gerresheimer topped the Stoxx 600, jumping 13.7% after reporting a strong second quarter, with net income more than doubling.

At the other end of the table, British online supermarket Ocado saw its shares fall 6% during afternoon trade, after U.S. retailer Kroger announced that the two companies would invest $55 million in a "customer fulfillment center" in Georgia, an automated warehouse facility with digital and robotic capabilities.

Swiss chemical company Sika shed 4% after UBS downgraded the stock from "neutral" to "sell."