logo
  

European Stocks Close Slightly Higher As Investors Digest Earnings Updates, BoE Rate Decision

European stocks closed higher on Thursday after a somewhat volatile session, as investors reacted to the Bank of England's interest rate decision, and the latest batch of earnings updates, in addition to looking ahead to the upcoming U.S. non-farm payroll data, due on Friday.

U.S.-China tensions remained on investors' radar after China said that it conducted "precision missile strikes" in the Taiwan Strait as part of military exercises that have raised tensions in the region to their highest level in decades.

The Bank of England today raised its benchmark rate by half-a-percentage point given the more persistent inflationary pressures and the tight labor market conditions. The monetary policy committee of the central bank voted 8-1 to lift the bank rate by 50 basis points to 1.75%, the highest rate since December 2008. This was the sixth consecutive rate hike.

The committee also decided to sell the stock of gilts purchased by the central bank, starting September. The bank intends to reduce government bond holdings of around GBP 10 billion per quarter.

The BoE projects inflation to be over 13% in the fourth quarter of this year, and to remain at very elevated levels throughout much of next year, before falling to the 2% target in 2025. The bank had earlier projected inflation to peak above 11 percent in October.

The central bank forecast the economy to grow 0.4% in the third quarter, slightly weaker than had been incorporated in the May Report.

The pan European Stoxx 600 advanced 0.18%. The U.K.'s FTSE 100 edged up 0.03%, Germany's DAX surged 0.55% and France's CAC 40 climbed 0.64%, while Switzerland's SMI gained 0.21%.

Among other markets in Europe, Austria, Czech Republic, Denmark, Finland, Iceland, Ireland, Portugal, Spain, Sweden and Turkiye closed higher.

Belgium, Greece, Netherlands, Norway, Poland and Russia ended weak.

In the UK market, Entain gained about 5%, Flutter Entertainment climbed 4%, Anglo American Plc, Dechra Pharmaceuticals and Glencore gained 3 to 3.2%. Glencore said its profits more than doubled to a record in the first half of the year.

Ocado Group, RS Group, CRH, Smith & Nephew, Whitbread, Auto Trader Group, Fresnillo, Ashtead Group, Smiths Group, Aveva, Sage Group and Halma gained 2 to 3%.

Rolls-Royce shares slumped 9%. The aero-engine maker has warned of looming economic challenges after reporting a bigger-than-expected fall in first-half profit.

Hikma Pharmaceuticals ended more than 6% down. Mondi shed about 5%, while Airtel Africa and BT Group both ended lower by about 3.3%.

In the French market, Credit Agricole rallied more than 5%. The French lender posted better-than-expected quarterly profits, driven by record activity in its investment banking division.

Air France-KLM, Hermes International and BNP Paribas gained 2 to 3%. Legrand, Accor, Societe Generale, Dassault Systemes, Saint Gobain, Pernod Ricard, ArcelorMittal and L;Oreal also ended notably higher.

Faurecia tumbled nearly 6%. Valeo ended 5.6% down. Atos, Renault and Carrefour also declined sharply.

In the German market, Zalando soared more than 13%. Siemens Healthineers, Infineon Technologies, HelloFresh, Adidas and Puma climbed 2 to 3%. Symrise, Siemens, Brenntag and HeidelbergCement also posted strong gains.

Lufthansa shares gained more than 6% after the German airline returned to operating profit in the second quarter, thanks to booming demand for air cargo flights.

Vonovia drifted down 4.7%. Deutsche Wohnen, Bayer, Continental and Covestro ended lower by 2 to 3%.

Data from Destatis showed factory orders decreased 0.4% on a monthly basis in June, after a revised 0.2% drop in May. Nonetheless, this was slower than the economists' forecast of -0.8%.

Germany's construction activity contracted the most since February 2021 amid heightened market uncertainty, sharp price rises and rising interest rates, survey data from S&P Global showed.

The construction Purchasing Managers' Index fell to 43.7 in July from 45.9 in June. The latest score signaled the steepest fall since February 2021, when severe bad weather had caused major disruption to work on sites.

The UK construction sector contracted for the first time in one-and-a-half-years in July, survey results from S&P Global showed on Thursday. The construction Purchasing Managers' Index posted 48.9 in July, down from 52.6 in June. The reading was expected to fall moderately to 52.0.

For comments and feedback contact: editorial@rttnews.com

Market Analysis

Follow RTT