European shares inched lower on Thursday, with banks under pressure before a European Central Bank policy meeting that is expected to provide little detail on plans to cut monetary stimulus.
A fifth day of gains in auto stocks, however, helped German shares hit their highest level in two weeks as cheap valuations have revived investor interest in the sector.
While the pan-European STOXX 600 index was down 0.1 per cent, the German blue-chip DAX index was up 0.5 per cent and Britain's FTSE traded flat.
ECB President Mario Draghi is set to start laying the groundwork for stimulus reduction when policymakers meet on Thursday, giving investors some hints but probably holding off on any major commitment.
“Nearly everything suggests that Draghi will be particularly accommodating, with no mention therefore of a QE (quantitative easing) recalibration today,” a Natixis trader said.
Financials were the biggest weight on the STOXX with banking stocks down 0.4 per cent, on track for their fourth straight day of losses.
Banks, whose lending business benefits from higher interest rates and yields, have been under pressure recently after strength in the euro fuelled talk the ECB could delay monetary policy tightening.
Among top euro zone bank decliners were Spain's Sabadell and Italy's UBI Banca and UniCredit, all down more than 1 per cent.
The head of Deutsche Bank, Europe's biggest lender, had on Wednesday called on the ECB to change course on providing cheap money, despite the strong euro, warning he sees price bubbles in stocks, bonds and property.
Carmakers were a bright spot, up 0.7 per cent and on track for their fifth straight day of gains.
Traders said investors were lured by cheap valuations, expectations that sales could be driven up by people replacing cars damaged during hurricanes in the United States, while efforts by German Chancellor Angela Merkel to avert bans of diesel vehicles in some cities also buoyed interest.
Ferrari lagged with a fall of 5.1 per cent after a double downgrade from Morgan Stanley to “underweight” from "overweight". Tobacco firm Imperial Brands rose 3 per cent after selling part of its stake in Spanish logistics company Logista .
British outsourcer Capita fell 4.7 per cent after restating its 2016 profit following accounting changes.