European stocks close lower; Italy unflinching on budget; UK minister resigns

  • European equities closed lower as investors reacted to comments from the Fed and monitored continental political developments.
  • The Fed decided to keep rates unchanged but said that it expects "further gradual increases," which pushed stocks slightly lower.
  • Italian Finance Minister Giovanni Tria said he had no intention of rowing back on Italy's contested 2019 spending plans.

European equities closed lower on the final trading day of the week as investors reacted to comments from the Federal Reserve and monitored continental political developments.

The pan-European Stoxx 600 closed provisionally 0.37 percent lower with most major bourses seen in the red.

Basic resources fell 3.41 percent and auto stocks were off by 1.89 percent as global trade concerns weighed further on sentiment. Oil stocks were also among the biggest fallers, down 1.41 percent, as crude prices fell sharply.

Banking stocks were also lower, falling 1.17 percent. One standout stock in the sector, UBS, saw its share price drop 2.65 percent after the U.S. Justice Department filed a suit against the bank for investors' losses linked to mortgage-linked securities prior to the financial crisis.

Another, Spanish lender BBVA, was also under pressure, off nearly 5.9 percent. This was after the announcement of a new bill in Mexico, curbing banks from charging commissions for certain services. Mexico represents about 40 percent of BBVA's overall net profit, Reuters reported.

The French-based Rubis plunged to the bottom of the European benchmark after posting its latest results and getting a rating downgrade. The stock was down by 11.22 percent.

The German group Thyssenkrupp dropped 9.08 percent after cutting its profit outlook for the second time this year.

Fed decision, politics in focus

Stateside, Wall Street began Friday's session in negative territory, although major indexes were still on pace to post solid weekly gains. Traders were rattled somewhat over fears around global economic growth and the pace of the Fed's interest rate hiking path.

The Fed decided on Thursday to keep rates unchanged but said that it expects "further gradual increases," which pushed stocks slightly lower. Higher interest rates tend to dent stocks as investors believe companies will have less room for dividends.

Investors are also closely monitoring developments in Italy, after the European Commission said Thursday that Rome's economic forecasts are not in line with its own calculations. Eurogroup President Mario Centeno met with Italy's finance minister Giovanni Tria on Friday. Tria said he had no intention of rowing back on Italy's contested 2019 spending plans, adding that a sharp reduction in Italy's budget deficit as demanded by the European Union would be "suicide" for the country's economy.

Meanwhile, in Brexit news, the U.K. government is set to hold critical meetings during the weekend, as European Council President Donald Tusk said Thursday he hopes for a breakthrough within days. On Friday, Jo Johnson, a junior transport minister, announced his resignation, issuing a scathing critique of Prime Minister Theresa May's Brexit plan, saying that options currently tabled by the British government — either a soft exit or "no-deal" scenario — "present the nation with a choice between two deeply unattractive outcomes, vassalage and chaos."

Johnson, the brother of former Foreign Minister Boris Johnson, said it was time to consider a new vote on Brexit.

Sterling fell back below $1.30 following the resignation and U.K. 10-year gilt yields dipped to a 5-day low.

On the data front, the latest growth rate numbers in the U.S. showed an increase of 0.6 percent in economic activity in the third quarter from the previous three-month period. Nonetheless, the data from the Office for National Statistics showed a contraction in business investment, at the fastest pace since early 2016.

Another source of concern for investors lies in the oil market, as U.S. crude sank further into bear market territory. West Texas Intermediate crude was off by 1.4 percent, dipping back below $60 a barrel by Europe's close.