European Stocks Close Lower As ECB Raises Rates And Signals More Hikes

(RTTNews) - European stocks closed lower on Thursday after the European Central Bank raised interest rates by 25 basis points and ECB President Christine Lagarde's remarks suggested the bank is unlikely to pause its policy tightening anytime soon.

Concerns about the health of the banking sector weighed as well.

Investors digested a slew of economic data from the region, and continued to react to quarterly earnings updates from European companies.

The pan European Stoxx 600 ended 0.47% down. The U.K.'s FTSE 100 drifted down 1.1%, Germany's DAX lost 0.51% and France's CAC 40 closed lower by 0.85%, while Switzerland's SMI declined 0.43%.

Among other markets in Europe, Austria, Belgium, Denmark, Finland, Iceland, Ireland, Netherlands, Norway, Poland, Russia, Spain and Sweden ended with sharp to moderate losses.

Czech Republic, Greece and Portugal edged higher, while Turkiye closed flat.

The European Central Bank raised its three key interest rates by a quarter basis point today as widely expected, with policymakers assessing that the inflation outlook in the euro area remained "too high for too long" and ECB President Christine Lagarde signaled more rate hikes ahead.

The Governing Council raised the main refinancing rate, or refi, by 25 basis points at 3.75%.

"The Governing Council's future decisions will ensure that the policy rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2 percent medium-term target and will be kept at those levels for as long as necessary," the ECB said.

"We are not pausing, it's very clear.....there is more ground to cover," Lagarde said during the post-decision press conference.

The US Federal Reserve, which raised interest rates by 25 basis points on Wednesday, gave signals of a pause ahead. Some observers had expected the ECB to follow suit.

Lagarde also revealed that some ECB policymakers had leaned towards a bigger hike of 50 basis points this month, adding that she did not hear any call for a pause.

In the UK market, St. James's Place and Glencore lost 6.4% and 6.1%, respectively. Informa, RS Group, Hiscox, WPP, Experian, Barclays, Legal & General, Prudential, Relx, British American Tobacco, Imperial Brands, BP, Standard Chartered, M&G and BAE Systems ended lower by 2 to 4.5%.

Next climbed 3.2%. Coca-Cola HBC, Halma, SSE, Severn Trent, Hargreaves Lansdown and Endeavour Mining gained 1 to 1.5%.

In the German market, Mercedes-Benz plunged 7.4%. Zalando ended 7% down. MTU Aero Engines, Commerzbank, Deutsche Bank, Fresenius, Hannover Rueck, Continental and Fresenius Healthcare shed 2 to 3.6%.

Infineon Technologies declined sharply despite raising its full-year guidance. Deutsche Post, Henkel, SAP and Munich Re also ended notably lower.

Qiagen surged nearly 3.5%. BMW rallied 2.75% after reporting a higher earnings margin for its cars segment, while Deutsche Boerse, Bayer and RWE gained 1.7%, 1.6% and 1.2%, respectively.

In Paris, Teleperformance tumbled more than 7%. Publicis Groupe and ArcelorMittal both lost about 5.5%.

Unibail Rodamco, Carrefour, Renault, Veolia, Capgemini, AXA, Societe Generale, Airbus Group, L'Oreal, Safran and Credit Agricole ended lower by 1.2 to 3.6%.

Engie, Sanofi and Pernod Ricard gained 1.2 to 1.4%. Eurofins Scientific and Vivendi posted moderate gains.

Eurozone producer price inflation eased further in March to the lowest level in two years amid a sharp slowdown in the price growth of energy, data from Eurostat showed.

The producer price index posted an annual increase of 5.9% in March, much slower than the 13.3% spike in February. That was in line with economists' expectations.

The euro area private sector economy expanded at the fastest pace in almost a year in April solely reflecting the growth in services activity, final data from S&P Global showed.

The HCOB final composite output index improved to 54.1 in April from 53.7 in March. The score has remained above the crucial 50.0 level for the fourth straight month.

Germany's exports registered a renewed sharper-than-expected decline in March on weak demand from China and the US, official data showed. Exports decreased 5.2% on a monthly basis in March, offsetting the 4% increase in February, Destatis reported. Exports were forecast to drop moderately by 2.4%.

The UK service sector expanded at the fastest pace in a year, driven by a sharp upturn in new orders, although strong inflationary pressures continued to persist, survey data from S&P Global revealed. The final Chartered Institute of Procurement & Supply services Purchasing Managers' Index rose to 55.9 in April from 52.9 in March. The flash reading was 54.9.

UK car sales increased for the ninth successive month in April but still remained below the pre-pandemic levels of 2019, the Society of Motor Manufacturers and Traders, or SMMT, said. Car registrations grew by 11.6% on a yearly basis in April.