London: Europe`s main stock markets stumbled on Thursday, as investors reacted to an escalation of tensions between Russia and the West, while also awaiting an ECB interest-rate decision.
London`s benchmark FTSE 100 index fell 0.14 percent to stand at 6,627.07 points approaching midday in the British capital.
Frankfurt`s DAX 30 inched up 0.05 percent to 9,134.57 points and in Paris the CAC 40 index slid 0.35 percent to 4,192.26, compared with Wednesday`s close.
"The escalation of sanctions, coupled with looming interest rate decisions, has seen a shaky start," said Alastair McCaig, market analyst at IG traders.
Russia is introducing a "full embargo" on most food imports from EU, US, and other Western countries which have imposed sanctions against Moscow over its policy on Ukraine, Prime Minister Dmitry Medvedev said on Thursday.
Medvedev warned that Russia could block overflights between Europe and Asia in retaliation for Western sanctions.
The European Central Bank (ECB) is widely considered unlikely to unveil any new policy moves at its monthly meeting on Thursday, despite a persistent threat of eurozone deflation and geopolitical risks, analysts said.
However, the shadow of deflation has lengthened with news on Wednesday that Italy has slipped back into recession, and last week French Prime Minister Manuel Valls was strongly critical of the ECB`s stance in view of low inflation.
At its June meeting, the ECB entered uncharted waters, taking one of its key interest rates into negative territory for the first time.
It lowered its benchmark refinancing rate to 0.15 percent and cut the deposit rate to minus 0.10 percent -- effectively charging banks for parking funds at the ECB, to encourage them to lend to businesses and consumers instead.
Ahead of the latest rate announcements, due at 1145 GMT, official data showed that German industrial production grew slightly in June, driven by rising construction output.
Germany is the biggest economy in the eurozone, the economic bloc of European countries that shares the euro currency.
"The burden of propping up the rest of the eurozone looks to finally be taking its toll on Germany, as for the second day in a row disappointing production figures have shaken the markets` confidence that they can make up for the underperformance of their neighbours," said McCaig.
Ahead of the ECB announcement, the Bank of England is widely expected to announce on Thursday that it is keeping its main interest rate at a record-low level of 0.50 percent.
In foreign exchange trading, the euro was lower at $1.3374 compared with $1.3382 late in New York on Wednesday.
The euro dipped to 79.40 pence from 79.41 pence on Wednesday. The pound slipped to $1.6841 from $1.6851,.
On the London Bullion Market, the price of gold fell to $1,303.90 an ounce from $1,306.50.
