by Diana Mandia
(Reuters) – European shares ended lower on Thursday, with the exception of London, as the European Central Bank (ECB) announced another rate hike and its president Christine Lagarde dismissed any impending lull in the market.
In Paris, the CAC 40 lost 0.51% to 7,290.91 points and the German Dax 0.13%. The British Footsie rose 0.34 per cent.
The EuroStoxx 50 index ended up 0.25%, the FTSEurofirst 300 0.09% and the Stoxx 600 0.13%.
The ECB raised interest rates by a quarter of a point on Thursday, as expected by markets, an eighth straight hike that did not stop the Frankfurt institution from leaving the door open to others despite signs of economic weakness in the euro zone and the start of a slowdown in inflation.
The ECB estimates that inflation will remain above its target of 2% until and including 2025.
“The slight upward revision of the ECB’s inflation forecast supported expectations of further tightening,” said Massimiliano Maxia, senior rate strategist at Allianz General Investment, adding another 25 basis points. “more than some in July”.
The ECB’s monetary policy decision comes a day after the US central bank announced a pause in the rate hike cycle, but its chairman Jerome Powell used a tone deemed “hawkish” and warned of the possibility of two more rate hikes before the end of the year.
In shares, online fashion retailer ASOS rose 14.7% after reporting a return to profitability in the third quarter, while H&M was upbeat in June after sales fell in the three months to the end of May, rising 5.3%.
In the process, the European distribution division showed a gain of 0.32% on Thursday.
The price-sensitive technology sector, on the other hand, lost 0.59%, while basic resources lost 0.34%, hurt by the decline in metal prices due to weak data on industrial production and retail sales in China.
In Paris, Lagardère lost 2.04% as European competition authorities investigate the conditions under which Vivendi (+0.1%) completed the takeover of its competitor.
In Zurich, SoftwareOne jumped 18.6% after a 2.9 billion Swiss franc (2.96 billion euro) takeover bid by Bain Capital Private Equity to delist the Swiss services group’s computers.
The VAT group fell 4.3% after announcing a reduction in working hours for its employees, a decision which will preserve its margins but sends a negative signal about the state of demand.
BY WALL STREET
At the close in Europe, the New York Stock Exchange was up, with the Dow Jones gaining 1.01%, the Standard & Poor’s 500 0.74% and the Nasdaq Composite 0.58%.
Despite opening in the red, large cap companies finally benefited from the release of solid economic indicators and the drop in US Treasury yields.
In France, INSEE published final May consumer price index (CPI) figures on Thursday, confirming an initial estimate of 5.1% year-on-year, with energy prices notably falling and lower food prices rising. The institute has also lowered its growth forecast for France for the second quarter to 0.1% from a previously expected 0.2%.
In the US, several economic indicators point to the strength of the economy despite inflationary pressures and rising interest rates: Retail sales rose unexpectedly in May, while weekly jobless claims remained steady.
The euro hit its highest level in more than four weeks against the dollar on Thursday after the ECB raised interest rates and announced likely future hikes.
The euro is trading at $1.0931, while the dollar, which was rising mid-session on support from Fed statements, fell (-0.6%) against a basket of currencies.
The yield on 10-year German government bonds rose six basis points to 2.504% after peaking at 2.548% earlier in the session following the ECB announcements. The interest rate on the two-year German bund, which is particularly sensitive to changes in interest rate expectations, rose 13 basis points to 3.17 per cent.
In the US, 10-year and two-year Treasury yields fell more than five and three basis points to 3.73% and 4.66%, respectively, as investors digested Thursday’s economic data and the fallout from the Fed announcements the day before.
After Wednesday’s pullback, oil prices rose on Thursday, supported by a weaker dollar and rising Chinese refining activity despite weak economic data from China.
Brent fell 2.92% to $75.34 a barrel. barrel, and US crude oil (West Texas Intermediate, WTI) lost 3.09% to $70.38.
MUST BE FOLLOWED ON FRIDAY:
The final inflation figures for the euro area for the month of May will be published on Friday.
(Written by Diana Mandiá, edited by Blandine Hénault)
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