European Stocks Close Notably Lower On Recession Fears After Sharp Rate Hikes

European stocks closed notably lower on Thursday amid concerns the interest rate hikes by the Federal Reserve, the Bank of England, and the Swiss National Bank will significantly slow down global economic growth in the coming quarters.

The central banks have also signaled more interest rate hikes in the coming months to fight soaring inflation.

The Fed raised its benchmark rates by 75 basis points on Wednesday, the third such hike in as many meetings, and pledged to continue raising rates as high as 4.6% in 2023 to fight inflation.

The Swiss National Bank today raised its benchmark interest rate to 0.5%, bringing an end to the era of negative rates in Europe.

The Bank of England announced its seventh consecutive hike, raising interest rates by 50 basis points, defying expectations for a bigger move, as policymakers assessed that the UK economy has already landed in a recession.

The Monetary Policy Committee decided to raise the bank rate by 50 basis points to 2.25% from 1.75%, in a three-way split vote. The seventh straight rate hike took the interest rate to the highest since the 2008 global financial crisis.

The European Central Bank joined the 75 basis point rate hike club earlier this month.

Meanwhile, survey results from the Statistical Office Insee showed the confidence among French manufacturers eased further as expected in September, though marginally.

The manufacturing confidence index dropped to 102 in September from 103 in August. That was in line with economists' expectations.

This downturn was due to the decrease in the balance of opinion on the expected trend in production as well as on order books.

The pan European Stoxx 600 shed 1.79%. The U.K.'s FTSE 100 drifted down 1.08%, Germany's DAX and France's CAC 40 ended lower by 1.84% and 1.87%, respectively, while Switzerland's SMI lost 1.18%.

Among other markets in Europe, Austria, Belgium, Denmark, Finland, Greece, Iceland, Ireland, Netherlands, Portugal, Spain, Sweden ended notably lower.

Norway ended with a modest loss, while Czech Republic, Poland, Russia and Turkiye closed higher.

In the UK market, JD Sports Fashion plunged more than 8% after a warning that higher energy costs will dampen consumer spending.

Ashtead Group, ICP, Hargreaves Lansdown, Dechra Pharmaceuticals, Segro, Entain, Land Securities, British Land, Intertek Group, Melrose Industries, Croda International, RS Group, Schrodders and Ocado Group lost 3 to 7.3%.

Shares of mining company Polymetal plummeted 11.5% after the company said it is considering moving its main corporate base out of Russia.

Coca-Cola HBC and Rio Tinto both gained about 2.3%. Kingfisher, Aveva Group, Anglo American, Glencore and Associated British Foods also closed higher.

In Paris, Accor slumped nearly 7% after investment bank JP Morgan cut its rating on the stock from neutral to underweight, saying the group would not be able to return to its previous level of profitability.

Unibail Rodamco, STMicroElectronics, Atos, Teleperformance, Hermes International, WorldLine and Dassault Systemes lost 4 to 6%.

Capgemini, Air France-KLM, Essilor, Saint Gobain, Faurecia, LVMH and Publicis Groupe also declined sharply.

Societe Generale, Danone and Orange gained 1 to 1.5%.

In the German market, HelloFresh tumbled nearly 7%, Zalando dropped 6.4% and Puma shed about 5%. Siemens Healthineers, Infineon Technologies, Sartorius, Deutsche Wohnen, HeidelbergCement, Fresenius, Merck and SAP lost 2.2 to 4.4%.

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