European stocks saw their biggest fall in three weeks on Thursday and currency markets were noticeably subdued as investors took to sidelines ahead of one of the big global central bankers gatherings of the year.

Japanese and Chinese stocks had suffered modest drops in Asia and the pace picked up in Europe as London’s FTSE sank 0.8 per cent and Frankfurt and Paris lost 1.2 per cent.

Stubbornly low oil prices and warnings about steel demand kept the pressure on miners, while pharma stocks were also hit with traders citing social media comments from US presidential candidate Hilary Clinton chastising EpiPen price hikes.

The wobbles saw demand for bonds return. German Bund yields dipped as Portugal’s borrowing costs also pulled away from recent one-month highs helped by a deal to recapitalise ailing state-owned bank Caixa Geral de Depositos.

“The recapitalisation of CGD is likely to have implications for Portugal’s budget, but all in all it is positive,” said DZ Bank strategist Daniel Lenz. “It’s better to have a stable banking sector.”

Currency markets were firmly focused on the annual central banker mountain getaway in Jackson Hole in Wyoming that starts later and will see Federal Reserve chief Janet Yellen speak on Friday.

The dollar, which is looking for any signal on whether US interest rates will rise this year, drifted lower at 100.30 yen and to $1.1283 to the euro.

“There is basically just a bit of risk aversion ahead of Jackson Hole,” said CMC Markets senior analyst Michael Hewson. "I think expectations are way too high, though, I don't think Yellen sets as much importance on Jackson Hole as Ben Bernanke did.”

On the data front, there was downbeat news from Europe's biggest economy Germany. The closely-followed Ifo survey showed an unexpected deterioration in business morale as the institute also warned that Brexit uncertainty was taking its toll.

“Business confidence in Germany has clearly worsened,” Ifo head Clemens Fuest said in a statement. “The German economy has fallen into a summer slump.”

Hot property

In commodities, crude oil prices remained under pressure after sliding sharply on Wednesday.

US crude was flat at $46.75 a barrel following a roughly 3 per cent drop overnight after an unexpectedly large inventory build in the world’s biggest oil consumer renewed worries about oversupply. Brent was back below $49.

Metalheads had copper near a two-month low, also on evidence of mounting supply, while nickel weakened as date revealed lower shipments to China.

“Despite the closure of eight small-scale producers so far, we could see imports stabilise, belying any concerns of supply constriction from the Philippines that has recently riled markets artificially boosting nickel prices,” Citi said in a note.

In Asian equities, Japan's Nikkei ended down 0.3 per cent following on from losses on Wall Street overnight.

Chinese stocks fell 1 per cent to extend their slide this week as investors took profit on recent red hot property shares which dropped 2 per cent. Banks stumbled too ahead of earnings and a crackdown on some lending practices.

“The whole (property) sector had surged more than 20 per cent at one point this month, and falls in share prices this morning were purely a result of investors' trading strategy as they want to lock in profits,” said Joe Qiao, a Shanghai-based analyst at Xiangcai Securities.

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