European Stocks Close Lower As Weak Earnings, Rate Concerns Weigh

European stocks closed lower on Thursday, weighed down by some disappointing earnings updates, and concerns about inflation and interest rates.

WPP, Unilever, Mercedes-Benz, Standard Chartered and BNP Paribas reported disappointing results.

The European Central Bank left its key interest rates unchanged, as expected, after raising them in the past 10 sessions, but adopted a cautious stance to suggest that the rates could stay “higher for longer” despite the easing inflationary pressures as the signs of a recession in the euro area economy increases.

Concerns about the outlook for U.S. interest rates weighed as well on the market.

The pan European Stoxx 600 ended down 0.48%. The U.K.’s FTSE 100 declined 0.81%, Germany’s DAX dropped 1.08% and France’s CAC 40 ended lower by 0.38%, while Switzerland’s SMI ended down 0.32%.

Among other markets in Europe, Austria, Belgium, Denmark, Greece, Netherlands, Norway, Russia, Spain and Sweden ended weak.

Finland, Iceland, Poland, Portugal and Turkiye closed higher.

The ECB Governing Council, led by Christine Lagarde, left the main refinancing rate, or refi, at 4.5% at the rate-setting session in Athens, Greece. The deposit facility rate was held at a record high 4% and the lending rate was kept at 4.75%.

“Inflation is still expected to stay too high for too long, and domestic price pressures remain strong,” the ECB said. “Based on our current assessment, we consider that rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target,” the bank reiterated.

Turkey’s central bank raised its policy rate by 500 basis points to combat inflation and pledged to strengthen the monetary tightening until a significant improvement in the inflation outlook is achieved.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey, or CBRT, headed by Governor Hafize Gaye Erkan, decided to raise the policy rate to 35% from 30%.

In the U.S., data from the Commerce Department said GDP spiked by 4.9% in the third quarter after jumping by 2.1% in the second quarter. Economists had expected GDP to surge by 4.2%.

The resilience of the U.S. economy has added to recent concerns about the Federal Reserve leaving interest rates higher for longer than investors had hoped.

In the UK market, Standard Chartered tanked 12.5% after reporting a sharp drop in quarterly profit, partly due to $900mn of China-linked charges.

Rentokil Initial plunged nearly 11%. Intertek, Unilever, Flutter Entertainment and Hikma Pharmaceuticals lsot 2.5 to 3%.

Reckitt Benckiser, AstraZeneca, Rolls-Royce Holdings and Royal Dutch Shell lost 1 to 1.5%.

M&G, Croda International, Persimmon, IAG, Ds Smith, Vodafone, National Grid, Berkeley Holdings, J. Sainsbury, St. James’s Place and Ferguson gained 1 to 2%.

In the German market, Siemens Energy tanked more than 35% after the company announced negotiations with the German government for potential state guarantees following significant setbacks in its wind division.
Mercedes-Benz ended down 5.7%. Siemens, Siemens Healthineers, Porsche, BMW, Puma, Adidas, Beiersdorf and Zalando lost 1 to 4.6%.

Infineon climbed more than 2%. BASF, Vonovia, Symrise, Airbus Group and Deutsche Bank gained 1 to 1.5%.

In Paris, Teleperformance plunged nearly 9%. BNP Paribas, Kering, Hermes International, Essilor, Renault, LVMH, L’Oreal, Publicis Groupe and Capgemini ended lower by 1 to 2.6%.

WorldLine soared more than 13%. STMicroElectronics gained about 5% and Carrefour rallied 4.8%. Danone climbed nearly 2.5%.

Michelin, Unibail Rodamco, Air Liquide and Airbus Group gained 1 to 1.5%.

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