European shares fall 1% on taper fears; commodities slump hits miners

European shares fell more than 1% on Thursday on fears of a sooner-than-expected tapering in global monetary policy, while a slump in commodity prices led mining stocks to a near one-month low.

By 0735 GMT, the pan-European STOXX 600 was down 1.4% at a two-week low, with mining stocks sliding 3.8% and tracking their worst day in three months.

Asian stocks also fell earlier in the day to their lowest levels this year, as minutes published Wednesday of the U.S. Federal Reserve's latest policy meeting gave the impression of a looming cut in its massive, pandemic-era bond-buying programme.

European shares slid

"This does not mean that U.S. interest rate hikes will also be arriving sooner than later, but the start of divergence of monetary policy between the United States and the rest of the world, notably Europe and Asia, will have (market) implications," said Jeffrey Halley, market analyst at OANDA.

Although the European Central Bank has so far stood pat on policy, rising inflation has prompted some policymakers to say it must begin to rein in its easy money policies that have been instrumental in lifting the STOXX 600 to record highs.

Focus will now turn to the high-profile annual U.S. Jackson Hole conference of central bankers in late August, where Fed Chair Jerome Powell could signal he was ready to start easing monetary support.

ECB President Christine Lagarde will not be attending the conference, an ECB spokesperson said this week.

Banking stocks including Asia-focused HSBC, Spain's BBVA and France's BNP Paribas fell between 1.5% and 3.3% and were among the biggest drags on the benchmark STOXX 600.

The travel and leisure index declined 2.1% amid a surge in cases of the Delta variant of the coronavirus, which has added to concerns of slowing global growth and taken the shine off a solid second-quarter corporate earnings season.

With the European earnings season nearly at the halfway mark, profit for STOXX 600 companies is expected to have surged 150% in the second quarter, the best since Refinitiv IBES records began in 2012.

Swedish heating technology specialist Nibe Industrier jumped 8.5% to the top of the STOXX 600 after posting a 64% jump in profit for the first half of the year.

Swiss building materials supplier Geberit, on the other hand, fell 2.2% as it warned about rising raw materials prices.

Utilities stocks, considered a safe bet at a time of economic uncertainty, were among the smallest decliners on the day.