European equities drop on eve of Bernanke speech

Europe's main stock markets fell further on Thursday, mirroring losses in Asia, with traders cautious on the eve of a speech from US Federal Reserve chairman Ben Bernanke. In late morning deals, London's benchmark FTSE 100 index of top companies fell 0.20 percent to 5,731.79 points, Frankfurt's DAX 30 shed 0.82 percent to 6,953.17 points and in Paris the CAC 40 slid 0.51 percent to 3,396.49. Madrid stocks retreated 0.86 percent and Milan dropped 0.67 percent in value, despite news of another successful Italian bond auction. The European single currency meanwhile firmed to $1.2560, compared with $1.2526 late in New York on Wednesday. Attention is now on a meeting of central bankers at Jackson Hole, Wyoming, where Bernanke is due to give a speech on Friday, with investors hoping he will outline plans for another round of monetary easing to kickstart the economy. "Jackson Hole is almost upon us," said analyst Alistair Cotton at CurrenciesDirect. "The question remains whether the chairman will make the announcement the market wants -- further quantitative easing (QE) -- or disappoint it by only announcing an extension or modification to Operation Twist. "Market sentiment about the likelihood of this has oscillated wildly, from nailed-on certainty last week to looking increasingly unlikely after the continuation of positive US data this week." Expectant eyes from around the world will be on Bernanke, looking for assurances that the US economy is solid or, if not, that the Fed is ready to invest more to stimulate growth. Markets have been on edge for weeks over whether the Fed chairman will act on the sluggish economy, making his keynote speech the main event at the Fed's annual international central banking symposium. Bernanke used the Jackson Hole venue the past two years to let markets and policymakers know what is on his mind. In 2010, he moved the markets with his signal of "QE2" -- a second $600 billion quantitative easing programme aimed at pushing down long-term interest rates. Elsewhere, in earlier deals on Thursday, Asian markets fell after Wall Street closed flat following a mixed bag of US economic data. Hong Kong dropped 1.19 percent, Tokyo fell 0.95 percent, Seoul lost 1.15 percent and Sydney was off 0.94 percent. In its closely-watched Beige Book, the Fed said that the US economy continued to grow at a tepid pace in the past two months, with slight improvements in retail sales and the housing market. However, the report, prepared ahead of the central bank's policy meeting next month, said many districts saw a softening in manufacturing, the sector that has been a key driver of the recovery from a deep 2008-2009 recession. Official data also showed that the American economy had expanded at a faster pace in the second quarter than first thought. The Commerce Department reported a clip of 1.7 percent for gross domestic product growth in the April-June period, revised from 1.5 percent. On Wall Street the Dow and S&P 500 were flat while the Nasdaq rose just 0.13 percent. Meanwhile, European Central Bank head Mario Draghi added to expectations the lender would resume its sovereign bond-buying scheme. Writing in the German weekly Die Zeit on Wednesday, he said the ECB would always act within its mandate and ensure price stability, but that it might have to resort to exceptional measures.