Energy Sector Drags European Stocks Lower

By Tommy Stubbington 

European stocks slipped Thursday, weighed down by a selloff in oil and gas shares, while Greek bonds continued to suffer in the aftermath of the weekend's election.

The Stoxx Europe 600 was 0.4% lower in early trade. Losses were concentrated in the energy sector, which was down 2.8%, as Wednesday's decline in U.S. oil prices that dragged down shares on Wall Street spilled over into Europe.

Oil's latest decline had overshadowed the U.S. Federal Reserve, which reiterated its statement that it will remain patient in raising rates.

The Fed statement had little impact on the dollar. The euro and the British pound were a touch lower against the buck Thursday.

Despite Thursday's declines, European shares have outperformed their U.S. peers since the European Central Bank last week announced it will embark on a bond-buying stimulus program.

A preference for European equities over U.S. markets is becoming more popular "but we don't think it's becoming consensus positioning wise yet, " said Deutsche Bank strategist Jim Reid.

Gains have come despite a sharp selloff in Greek assets as markets take fright at the new Syriza-led government. Athens's main stock index was 2.1% higher in early trade, after Wednesday's 9.2% decline.

But Greek bonds continued to weaken after their massive losses in the previous session, with the yield on the bond maturing in July 2017 a percentage point higher Thursday at nearly 18%. Yields rise when prices fall.

The ECB action has buoyed bonds across the eurozone and helped insulate the rest of the currency area from the turmoil in Greece. Italian and Spanish bonds have weakened only modestly.

German bonds, considered the eurozone's safest, remained in high demand Thursday, with the 30-year bond yield falling below 1% for the first time. Yields fall as prices rise.

In commodities markets, Brent crude oil was steady at $48.49 a barrel, and gold was 0.5% lower at $1,280.00 and ounce.

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