IBEX 35 finishes slightly lower as ECB meeting comes into focus

The benchmark gauge drifted lower by 0.02% to 9,801.70 points after carving out a fresh year-to-date high at 9,804 during the previous session.

Analysts at Citi weighed with a favourable view on shares of Telefonica - one of the best performers on the Ibex over the past few weeks - reiterating their recommendation to 'Buy' with a target price of 13.50 euros. Improved margins and favourable FX tailwinds will drop through to the company's free cash flows, allowing for a faster reduction in the firm's gearing.

Another key stock on Tuesday was Santander, after it confirmed of its Allfunds platform for 1.88bn euros, from which it will pocket 470m euros thanks to its 25% stake, which will generrate 300m euros in capital gains. Stock in the lender led by Ana Botín closed 0.06% higher.

Nevertheless, it was Cellnex (2.17%) and DIA (1.11%) which were at the top of leaderboard.

At the bottom of the pile were Acerinox (-1.74%) and Meliá Hotels (-1.63%), followd closely by a drop in Grifols (-1.58%) and IAG (-1.2%).

Stock in BBVA lost -0.15%, failing to climb atop technical resistance at 6.60 euros for a second day in a row.

Out on the Big Board, Laboratorios Farmacéuticos Rovi was a standout gainer, with shares up 6% on the heels of a positive update on a blood-clotting compound. Other micro-caps moving higher included Amper (+11%) and Fersa Energías Renovables (+7%).

WAITING ON THE ECB

Tuesday's calendar was replete with economic indicators, including German factory orders for the month of February which crashed 7.4% month-on-month, erasing January's 5.2% advance.

In Britain, home prices gained 0.1% in February, undershooting forecasts for a rise of 0.3%, while euro area GDP was confirmed at up 0.4% quarter-on-quarter for the last three months of 2016.

On a positive note, the Spanish Treasury's auction of six and 12-month debt was once again heavily oversubscribed, sending yields further into negative territory.

All of the above came ahead of the week's main event, the ECB's policy meeting ion Thursday and follow-up press conference from its chief, Mario Draghi.

Analysts are not expecting any changes to the main polciy settings but there is great interest in its latest set of macroeconomic projections.

Economists at Barclays Research told clients on 3 March: "We do not expect any policy changes at the March ECB meeting, but the GC is likely to point to a more balanced risk regarding the macroeconomic scenario and inflation outlook. The Q&A may focus on the improved macro outlook and the possible next steps towards a less ultra-accommodative monetary policy stance."

Wall Street was trading mildly lower at the closing bell, with Fed funds futures pricing in a 96% chance of a 15 March rate hike from the Fed, the latest monthly jobs (on 10 March) permitting.