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European stocks drop as Japan quells stimulus bets

London - European stocks fell as prospects for global stimulus dimmed after Bank of Japan Governor Haruhiko Kuroda quelled speculation of so-called helicopter money.

The Stoxx Europe 600 Index lost 0.2% at 10:12 in London. It fell as much as 0.6% after Kuroda in a BBC Radio 4 programme said he sees no need and no possibility of Japan introducing measures that involve the central bank directly funding government spending.

Speculation of such a move had sent global equities higher last on Thursday. His comments precede the European Central Bank’s meeting later today, followed by a press conference by President Mario Draghi.

"Kuroda has just given investors a bit of a disappointment," said Peter Garnry, head of equity strategy at Saxo Bank in Hellerup, Denmark.

"The market had actually changed its sentiment and pricing based on the assumption that we would get something big on the fiscal stimulus side, and that Japan would be the first wave. We expect the ECB to come up with no new initiatives today, though Draghi will likely hint at more action later in the year."

With the ECB forecast to keep rates unchanged in today’s decision, investors will pay attention to comments by Draghi at 14:30 in Frankfurt for signs on looser policy following the UK’s vote to leave the European Union.

Europe’s benchmark has alternated between gains and losses in the past week, struggling to recover its post-Brexit losses. While stocks closed at a four-week high on Tuesday, boosted by positive financial results, they remain below their level on the day of the referendum.

Investors also weighed a slew of earnings reports. ABB advanced 2.2% as the world’s biggest maker of power grids said China continued to invest in large projects and posted better-than-forecast earnings.

Hermes International SCA rose 3.2% after the maker of luxury clothing and handbags reported sales growth that topped projections.

Deutsche Lufthansa led airlines shares lower, down 8.1% after cutting its 2016 profit forecast.

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