European stocks and euro sag as rates held steady

Europe's major stock markets slid and the euro dipped Thursday after interest rates were left on hold in Britain and the eurozone.

The US Federal Reserve had increased borrowing costs as expected on Wednesday, adding to subdued sentiment in the final round of central bank decisions this year.

The Bank of England as expected kept its key interest rate at 0.5 percent, though it said it was keeping an eye on Britain's Brexit-fuelled inflation.

"Although inflation in the United Kingdom has jumped to its highest level in almost six years, it seems that the growing uncertainty over Brexit is likely to encourage the central bank to adopt a wait-and-see approach moving forward," said Lukman Otunuga, an analyst at the FXTM currency trading firm.

"While the Monetary Policy Committee maintained the view that 'further modest increases' in the key rate may be needed in the coming years, sterling's muted price action suggests this has fallen on deaf ears," he added.

The pound was down slightly against the dollar in European afternoon trading.

London stocks shed 0.3 percent as investors looked past official data showing that retail sales rebounded 1.1 percent in November from October, buoyed by Black Friday price reductions.

Meanwhile the European Central Bank also left its headline interest rates unchanged at historic lows, including the main refinancing rate pegged at zero, and kept its huge support for the eurozone economy in place.

It significantly lifted its eurozone growth forecasts for the coming years, expecting to see the economy expand 2.4 percent this year, 2.3 percent in 2018 and 1.9 percent in 2019.

But inflation is not expected to return to its optimal level of just under 2 percent, with the ECB saying it expects consumer prices to rise 1.7 percent in 2020.

Frankfurt slid 0.2 percent and Paris dipped 0.1 percent in afternoon trading.

- Retail sales cheer Wall Street -

Wall Street opened higher, with the Dow adding 0.2 percent in the first minute of trading.

"US stocks are higher in early action, with yesterday's Fed rate hike being followed by unchanged decisions out of a host of European central banks, while the markets are digesting an upbeat read on retail sales and reports of a tentative tax reform deal," said analysts at Charles Schwab brokerage.

The US holiday shopping season got off to a robust start in November, sending the US retail sector surging along with higher gasoline sales, according to government data released Thursday.

Total retail and food service sales rose 0.8 percent over October, with American consumers plunking down $492.7 billion, according to the seasonally adjusted figures. The result handily overshot analyst expectations, which called for an increase of just 0.3 percent.

The US Federal Reserve on Wednesday lifted borrowing costs as expected and said economic growth would be stronger than initially forecast, while inflation would also improve. It also said its projections for three more rate rises next year were on course.

Citing the strong labour market and solid economy, the Fed's policy-setting Federal Open Market Committee increased the key lending rate to 1.25-1.5 percent, an increase of a quarter point on the cost of loans for everything from houses to cars.

Asian stocks mostly fell Thursday as traders ignored another record finish for the Dow on Wall Street and eyed gyrations in the dollar.

- Key figures around 1330 GMT -

London - FTSE 100: DOWN 0.3 percent at 7,477.45 points

Paris - CAC 40: DOWN 0.1 percent at 5,391.85

Frankfurt - DAX 30: DOWN 0.2 percent at 13,101.53

EURO STOXX 50: DOWN 0.2 percent at 3,575.63

New York - DOW: UP 0.2 percent at 24,632.50

Tokyo - Nikkei 225: DOWN 0.3 percent at 22,694.45 (close)

Hong Kong - Hang Seng: DOWN 0.2 percent at 29,166.38 (close)

Shanghai - Composite: DOWN 0.3 percent at 3,292.44 (close)

Euro/dollar: DOWN at $1.1804 from $1.1828 at 2200 GMT

Pound/dollar: DOWN at $1.3412 from $1.3415

Dollar/yen: UP at 112.68 yen from 112.56 yen

Oil - Brent North Sea: DOWN 30 cents at $62.14 per barrel

Oil - West Texas Intermediate: DOWN 46 cents at $56.13

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