European Stocks Close Lower As Growth Worries Weigh; BoE Raises Interest Rate

(RTTNews) - European stocks closed lower on Thursday, extending recent losses, with investors continuing to assess earnings updates and reacting to the interest rate hike by the Bank of England.

Data showing a drop in eurozone and UK services sector activity in the month of July, and disappointing report on German exports weighed on sentiment.

The Bank of England raised its benchmark interest rate by a quarter point on Thursday, after a half percentage point hike last time, citing persistence of high inflation.

In a three-way split, the nine-member Monetary Policy Committee decided to lift the bank rate to 5.25 percent, the highest since early 2008. This was the fourteenth consecutive rate hike.

Six members including Governor Andrew Bailey voted for a 25 basis points hike, while Jonathan Haskel and Catherine Mann preferred to raise the rate by 50 basis points and Swati Dhingra called for no change.

The BoE expects inflation to fall significantly to around 5.0 percent by the end of the year. However, services price inflation is projected to remain elevated at close to its current rate in the near term.

But going forward, the BoE said inflation will return to the 2 percent target by the second quarter of 2025.

The pan European Stoxx 600 ended down by 0.63%. The U.K.'s FTSE 100 drifted down 0.43%, Germany's DAX and France's CAC 40 lost 0.79% and 0.72%, respectively. Switzerland's SMI dropped 1.12%.

Among other markets in Europe, Belgium, Denmark, Iceland, Ireland, Netherlands, Spain, Sweden and Turkiye closed weak.

Austria, Greece, Portugal and Russia ended higher, while Czech Republic, Norway and Poland settled flat.

In the UK market, Mondi dropped more than 6.5%. BT, Fresnillo, TUI, St. James's Place, Smith & Nephew, National Grid and Vodafone lost 2 to 4.3%.

AstraZeneca, Intercontinental, Pennon, IAG, GlaxoSmithKline, J Sainsbury, Halma, Diageo, Relx and Tesco also ended sharply lower.

Rolls-Royce Holdings rallied 4.5% after the aero-engineer reported a jump in first-half profit, led by a large improvement in its civil aerospace margin.

Admiral Group climbed 3.7% and Entain gained about 2.3%. Baclays, Natwest, JD Sports Fashion, Taylor Wimpey and Antofagasta also posted strong gains.

In the German market, Infineon plunged more than 9% after the chipmaker disclosed a 10% decline in its quarterly adjusted, or "segment," result compared to the previous quarter.

Porsch ended nearly 3% down. BMW declined sharply after the automaker warned of inflation and supply chain issues.

Continental, MTU Aero Engines, E.ON, Siemens Healthineers and Symrise also declined sharply.

Zalando surged 7%. Beiersdorf gained nearly 4%, while Merck, Sartorius and Commerzbank ended higher by 2.8 to 3.2%. Deutsche Bank, Fresenius Medical Care, Puma, Vonovia, HeidelbergCement and Deutsche Post gained 1.2 to 2.1%.

In Paris, Veolia dropped 3.4%. Sanofi, STMicroElectronics and Capgemini lost 2.5 to 2.8%.

Michelin declined nearly 2%. AXA lost 1.6% after the comapny said its first-half net income edged down to 3.833 billion euros from last year's 3.852 billion euros.

Engie, Danone, Hermes International, Vinci, Thales, Legrand, Alstom, Unibail Rodamco, Air Liquide and Renault lost 1 to 1.6%.

Societe Generale shares surged 3.5% after the lender returned to profit in the second quarter of this year and announced the launch of the 2022 share buyback program, for around 440 million euros.

Teleperformance gained about 2.5%. TotalEnergies, Bouygues, Credit Agricole and BNP Paribas ended higher by 1 to 2%.

Euro area private sector contracted the most in eight months in July due to the deepening downturn in manufacturing and a near-stalling of services output. The final HCOB composite output index fell to an eight-month low of 48.6 in July from 49.9 in June, S&P survey results showed Thursday. The flash score was 48.9.

In economic news, Eurozone producer prices declined for the second straight month in June and at the fastest pace in three months on a sharp reduction in energy prices, data released by Eurostat showed.

The producer price index posted an annual decline of 3.4% in June, faster than the 1.6% decrease in May. Prices were forecast to fall 3.1%.

Moreover, this was the steepest decline since June 2020, when prices had fallen 3.7%.

The UK private sector expanded at the slowest pace in six months in July amid weaker growth in new orders and rising inflationary pressures, survey results from S&P Global and the Chartered Institute of Procurement & Supply showed.

The final services business activity index dropped to 51.5 in July from 53.7 in the previous month. There was no change in score compared to the flash estimate.

Switzerland's consumer price inflation eased for the fifth straight month in July to the lowest level in one-and-a-half years, the Federal Statistical Office reported today.

The consumer price index, or CPI, climbed 1.6% year-over-year in July, slightly slower than the 1.7% gain in June. That was in line with economists' expectations.

This was the weakest rate of increase since January last year, when prices had risen the same 1.6%.