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European Stocks Close Lower Again On Recession Fears

After recovering from a weak start and even managing a brief spell in positive territory around early afternoon, European stocks fell and ended notably lower on Thursday, weighed down by fears about the possibility of a recession.

In his testimony before the Senate Banking Committee on Wednesday, Federal Reserve Chief Jerome Powell indicated the Fed plans to continue moving expeditiously to combat inflation but argued the U.S. economy is strong enough to handle tighter monetary policy.

However, Powell later acknowledged that achieving a "soft landing" will be "very challenging" due in part to factors outside of the Fed's control and noted a recession is "certainly a possibility."

Weak economic data from Europe weighed as well on sentiment.

The pan European Stoxx 600 ended 0.82% down. The U.K.'s FTSE 100 drifted down 0.97%, Germany's DAX ended lower by 1.76% and France's CAC 40 shed 0.56%, while Switzerland's SMI dropped 0.71%.

Among other markets in Europe, Austria, Belgium, Czech Republic, Finland, Ireland, Netherlands, Norway, Poland, Sweden and Turkey ended with sharp to moderate losses.

Denmark and Spain posted modest losses. Russia closed sharply higher, while Greece, Iceland and Portugal ended flat.

In the UK market, Antofagasta, British Land, Rolls-Royce Holdings, WPP, Pershing Square Holdings, Anglo American Plc, Barclays, Fresnillo, Natwest Group, Lloyds Banking Group, Endeavour Mining and IAG lost 2.8 to 6%.

Ocado Group climbed 4.3% and Hikma Pharmaceuticals surged nearly 3%, while BT Group, LSE, Burberry Group, Avast and Rentokil Initial gained 1.4 to 2%.

In the French market, Air France-KLM ended more than 7% down. Faurecia, Societe Generale, BNP Paribas, Saint Gobain, Unibail Rodamco, Publicis Groupe, Credit Agricole, Michelin, Carrefour and Renault drifted down 2.5 to 6%.

Atos rallied more than 6%. LVMH, Dassault Systemes, L'Oreal, Hermes International, Essilor and WorldLine gained 1 to 3%.

In Germany, Deutsche Bank plunged more than 11%. Daimler, Brenntag, Continental, BASF, Porsche Automobil, BMW, Covestro and Volkswagen lost 3 to 6%.

Real estate group Aroundtown plunged more than 6% after J.P. Morgan downgraded the stock to "underweight".

HelloFresh surged up nearly 3.5%. Fresenius Medical Care, Sartorius, Fresenius, Adidas and Qiagen gained 1.5 to 3%.

The euro area private sector expanded at the slowest pace in more than a year in June as the manufacturing output contracted for the first time in two years and growth in the service sector eased sharply, preliminary data from S&P Global showed.

The flash composite output index fell to a 16-month low of 51.9 in June from 54.8 in the previous month. The score was forecast to ease moderately to 54.0.

The services Purchasing Managers' Index declined to 52.8, down from 56.1 in May and economists' forecast of 55.5. Similarly, the manufacturing PMI slid to 52.0 in June from 54.6 a month ago. The reading was below the forecast of 53.9.

Separate surveys showed business activity in the bloc's two largest economies, Germany and France, suffered a sharp loss of momentum at the end of the second quarter.

Elsewhere, the U.K. budget deficit exceeded the official estimate in May as higher inflation pushed up interest payments on government debt, the Office for National Statistics said. Public sector net borrowing, excluding public sector banks, declined GBP 4.0 billion from the previous year to GBP 14.0 billion in May. Economists had forecast the deficit to fall to GBP 12 billion.

The UK private sector logged a better-than-expected growth in June but that was unchanged from the 15-month low seen in May, flash survey results from S&P Global showed. The Chartered Institute of Procurement & Supply flash composite output index held steady at 53.1 in June, while the reading was expected to fall to 52.6. The score remained above the neutral 50.0.

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