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European markets close lower as ECB’s Draghi defends easy policy; Schaeffler plunges 12%

European markets closed lower on Tuesday after the president of the European Central Bank, Mario Draghi, defended the bank's loose monetary policy and said a premature ending to easing could lead to another recession.

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The pan-European Stoxx 600 was down 0.79 percent, with the majority of sectors and European bourses trading in negative territory.

The euro dipped on Draghi's comments and was seen trading at $1.1191 against the greenback on Tuesday morning, having fallen back from an 11-day high of $1.1220. However, it bounced up by early afternoon deals to trade at $1.1291.

Auto stocks were among the poorest performing sectors, down 1.47 percent. German auto manufacturer Schaeffler plunged more than 12 percent to the bottom of the benchmark after posting disappointing second-quarter 2017 earnings and cutting guidance.

Stada Arneimittel also sropped more than 3 percent after its takeover offer by private equity group Cinven and Bain Capital failed to win shareholder approval.

Meanwhile, in the U.S. markets opened mostly lower on Tuesday after Google was hit with a $2.7 billion fine from European regulators. Shares of Google-parent Alphabet dropped more than 1 percent in early trade.

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Earlier on Tuesday, the Bank of England's Governor Mark Carney announced that banks would have to increase the levels of capital they hold.

"We want to move the levels of capital back up to the level they should be. Any time you move into more benign credit conditions there have been fewer defaults," Carney said at the release of the Central Bank's latest biannual Financial Stability Report.

The banking sector as a whole rose 0.66 percent shortly after the announcement.

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