Oil Surge, ECB Rate Hike Weigh On European Market Sentiment

(RTTNews) - European stocks closed weak on Thursday as concerns about inflation due to elevated oil prices amid the ongoing conflict in the Middle East rendered the mood bearish. Investors also weighed the European Central Bank's decision to raise interest rates and warning of inflation risks.

The European Central Bank today raised its interest rate by 25 basis points to 2.5% as widely expected. The ECB staff released the latest round of macroeconomic projections, and they raised the inflation forecasts for next year and 2028.

All the forecasted rates are above the ECB's inflation target of 2%.

The bank forecast Eurozone economic growth at 0.9% this year, 1.4% next year and 1.5% in the year after. The growth projections for this year and next were upgraded to mainly reflect the greater than expected resilience of the euro area economy, the ECB said.

The central bank affirmed that it would follow a data-dependent and meeting-by-meeting approach to determining the appropriate policy stance. The Governing Council is not pre-committing to a particular rate path, the bank reiterated.

Brent crude futures rose about $107 a barrel, gaining more than 5.5%, raising concerns about inflation and further tightening by central banks.

The pan European Stoxx 600 ended down 0.69%. The U.K.'s FTSE 100 dropped 0.57%, Germany's DAX closed 0.84% down, and France's CAC 40 settled lower by 0.49%. Switzerland's SMI finished with a loss of 0.49%.

Among other markets in Europe, Belgium, Denmark, Finland, Greece, Iceland, Ireland, Netherlands, Norway, Poland, Spain, Sweden and Türkiye closed weak.

Austria, Czech Republic, Portugal and Russia ended higher.

In the UK market, miners Antofagasta, Anglo American Plc and Glencore closed down by 5.7%, 4.9% and 4.1%, respectively. Endeavour Mining ended down by 3.5%, Rio Tinto shed 3.1% and Fresnillo closed nearly 3% down.

Associated British Foods ended down by nearly 8% despite the company raising its adjusted earnings guidance. The stock fell due largely to the negative outlook from the Sugar division. The company confirmed that Primark will launch home delivery across Great Britain from a new automated fulfilment site in Sheffield.

M&G, Weir, Halma, Barratt Redrow, 3i Group, Marks & Spencer, Spirax Group, Land Securities, Bunzl, Investec, Croda International, Prudential and Standard Life also closed sharply lower.

Imperial Brands, British American Tobacco, Vodafone Group, BP, Compass Group, Reckitt Benckiser, BAE Systems, Whitbread, BT Group and Babcock International gained 1%-2%.

In the German market, Hochtief lost more than 6%. Vonovia, Siemens Energy, Zalando, SAP, Adidas, Siemens, Infineon, Beiersdorf, Heidelberg Materials, MTU Aero Engines and Bayer lost 1%-3%.

Deutsche Boerse moved up more than 2%. Continental, Hannover RE, BASF, Rheinmetall, Deutsche Post, Fresenius, Brenntag and Allianz also closed higher.

In the French market, ArcelorMittal closed nearly 2.7% down. EssilorLuxottica, Danone, STMicroelectronics and L'Oreal lost 1.6%-2.2%.

LVMH, Vinci, Accor, Edenred, Renault, Air Liquide, Pernod Ricard, Sanofi, Unibail Rodamco, Schneider Electric, Stellantis and Michelin also ended notably lower.

Orange climbed nearly 2%. Publicis Groupe, Teleperformance, Engie, Dassault Systemes, Kering, Bureau Veritas, Carrefour and Societe Generale gained 0.5%-1.3%.

Data from Destatis showed Germany's consumer price inflation accelerated to a four-month high in August, rising 2.9% year-on-year, in line with estimates, after a 2.8% increase in July. The rise in energy prices, caused primarily by the war in Iran, was particularly noticeable in the case of motor fuel prices.

The EU harmonized inflation also rose to a four-month high of 2.9% from 2.8% in the previous month, as estimated.

On a monthly basis, EU harmonized CPI in Germany moved up 0.2% but slower than the 0.8% rise posted in July, confirming the flash data. Likewise, the harmonized index of consumer prices climbed 0.2%, following the prior month's 0.9% increase.

The RICS UK Residential Market Survey showed that the house price balance improved to -28% in August from an upwardly revised -29% in July, reaching a five-month high as the housing market showed signs of stabilizing.

Property prices are still expected to fall over the next three months but stabilize over a 12-month horizon, the survey said. RICS warned that higher interest rates or heavier property taxation after October's budget could weigh on prices.