LONDON: Disappointing results from European banks dragged stocks lower on Thursday while investors waited for the European Central Bank to give hints on the timing of future interest rate rises.
Wall Street also looked set to open lower, adding to recent equity losses that have accompanied evidence that investors are becoming concerned about global economic growth.
Eyes were also on commodity markets where copper hit a seven week low and silver extended losses that have reached nearly 20 percent this week.
World stocks as measured by MSCI were down almost a third of a percent, particularly dragged down by Europe.
The FTSE urofirst 300 lost more than three-quarters of a percent after falling 1.4 percent on Wednesday, hurt then by weak US economic data concern over China's growth outlook and forecast-lagging company earnings.
Data on Wednesday showed weaker US private hiring than expected in April and a sharper cooling of US service sector growth.
The big drag on Thursday was from the banking sector. British bank Lloyds fell 8.6 percent after it suffered a 1.1 billion hit in Ireland and said it will take a 3.2 billion pound ($5.3 billion) provision to cover it for losses from the mis-selling of protection insurance.
Societe Generale, France's second-biggest listed bank, lost 4.2 percent after first-quarter results missed expectations.
Of the 38 percent of companies that have reported first-quarter results on the STOXX Europe 600 Banks index, half have missed expectations so far, according to Thomson Reuters StarMine data.
INTEREST RATES For many, though, Thursday was a case of listening for the magic words waiting to see if ECB President Jean-Claude Trichet will point to a rate rise in June by mentioning "strong vigilance" in a news conference later in the session.
The ECB lifted interest rates in April, not only signalling the launch of an anti-inflation programme but creating expectations of rate differentials between the bank and other monetary authorities, notably the US Federal Reserve.
No change in euro zone rates is expected on Thursday, but overall, as Koen De Leus, strategist at KBC Securities, put it, "there is insecurity in the markets." The higher yields available in the euro zone, Australia and elsewhere have weakened the dollar, although it recovered on Thursday from losses earlier in the session.
The euro traded at around $1.48.Traders said that if Trichet repeats the "strong vigilance" phrase, it could push back above $1.49.
But even if he leaves it out, the currency is not seen likely to fall much from current levels given the existing rate differences. Currency specialists FxPro said in a note that the euro zone was thriving despite intense pressures.
"A possible Greek debt restructure, a Portuguese bailout, a sharp decline in Spanish house prices, a Finnish electoral revolt against bailouts all have been essentially ignored by the single currency," it said.
The firm said it was all down to interest rates, German economic strength and increasing demand from Asia FX reserve managers for something other than the "brittle" dollar.
On euro zone government bond markets, yields on short-term two-year core debt rose to their highest in almost two-and-a-half years.
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