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Europe stocks close lower ahead of ECB meeting

European shares closed lower on Wednesday after the business activity data for the euro zone showed a slight downtick, and as investors await stimulus measures from the European Central Bank.

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FTSE
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CAC 40
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IBEX 35
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The pan-European FTSEEurofirst 300 closed flat at 1,373 after trading in a tight range, as investors continued to shun riskier assets.

The final reading of the euro zone's Composite Purchasing Managers' Index (PMI) - which measures both the manufacturing and services sector - posted a figure of 53.5, down slightly from April's near-three year high of 54.0, according to data provider Markit. This signaled a continued recovery and growth in the region for the 11th month running.

The FTSE closed down around 0.31 percent at 6810, the French CAC was down 0.04 percent at 4,501 and the German DAX was slightly higher at 9,925 at market close.

Autos saw the heaviest losses and the sector was down nearly 1 percent in afternoon trade, before closing 0.59 percent lower. Fiat closed over 2 percent. PSA Peugeot Citroen and Volkswagen were down around 2.65 percent and 1.5 percent respectively.

Read MoreEuro zone business growth eases but recovery intact

ECB in focus

Markets are eyeing any potential stimulus measures that European Central Bank (ECB) President Mario Draghi could implement at Thursday's Governing Council meeting. Interest rate cuts, cheap loans to banks or even a U.S. Federal Reserve-style asset purchase program could be on the cards and market participants are busy positioning themselves for any eventualities.

The need for fresh stimulus was further confirmed on Tuesday when euro zone inflation grew at a slower rate than expected, heightening fears that the region is heading for deflation - when consumer prices spiral lower.

Meanwhile, G-7 leaders began their meeting in Brussels Wednesday with the agenda dominated by the ongoing situation in Ukraine, relations with Russia as well as other foreign policy topics. The meeting will conclude Thursday afternoon and was originally scheduled to take place in Russia.

Read MoreEU's Barroso warns Russia of more sanctions

US data disappoints

In the U.S., stocks opened lower after data had private-sector job creation failing to live up to expectations in May.

The ADP private sector payrolls report, usually a warm-up act for the official payrolls, found the private sector added 179,000 jobs last month versus a 215,000 estimate.

Read MoreEuro zone inflationfall piles pressure on ECB

Asian equities were mixed on Wednesday as caution set in ahead of this week's key risk events.

Tesco shares fluctuate

Shares of U.K. supermarket Tesco rose nearly 2 percent before closing around 1.34 percent lower after the company reported a sharp fall in first-quarter sales, hurt by price cuts and subdued consumer spending.

Read MoreTesco reports steepsales fall, blames price cuts

In other stocks news, shares of Swiss travel retailer Dufry rallied after it announced it would buy fellow travel retailer Nuance in a 1.55 billion Swiss franc ($1.73 billion) deal.

Repsol shares closed 3.57 percent down, after being briefly suspended from trade, after Mexican state-owned oil company Pemex said it was selling its stake in the Spanish oil company.

Meanwhile, shares of Danish health care product maker Coloplast were 3 percent higher at market close after giving a strategy update which detailed a planned increase in sales over the next few years.

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