European stocks and bonds retreated after European Central Bank officials poured cold water on expectations for rapid rate cuts even as data from Germany underscored the challenging backdrop for economic growth and corporate profits.

The Stoxx Europe 600 index slipped 0.5% at the close, extending a lackluster start to the year. Consumer goods and retailers led the decline after data showed Germany’s economy contracted for the first time since the pandemic last year. Germany’s 10-year yield rose about five basis points to a one-month high.

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