European Stocks Close Sharply Lower On Weak Earnings, Economic Data

European stocks closed sharply lower on Thursday, weighed down by some disappointing economic data from the U.S., and a sell-off in bank stocks after the Bank of England lowered its key interest rates.

Downbeat eurozone PMI and unemployment data, and some disappointing earnings weighed as well on markets.

The Bank of England lowered its benchmark rate for the first time since the onset of the coronavirus pandemic as inflation receded and the underlying growth momentum remained weaker.

In a very close call, the Monetary Policy Committee, led by Governor Andrew Bailey, decided to cut the bank rate by a quarter-point to 5% from 5.25%, which was the highest since early 2008.

Policymakers expect inflation to rise to around 2.75% in the second half of the year as declines in energy prices last year fell out of the annual comparison. However, inflation is projected to fall back to 1.7% in two years’ time and to 1.5% in three years.

The pan European Stoxx 600 dropped 1.23%. The U.K.’s FTSE 100 ended down 1.01%, while Germany’s DAX and France’s CAC fell 2.3% and 2.14%, respectively. The Switzerland market was closed for National Day holiday.

Among other markets in Europe, Austria, Belgium, Finland, Greece, Iceland, Netherlands, Norway, Poland, Portugal, Spain and Sweden closed with sharp to moderate losses.

Greece, Iceland and Russia ended modestly lower. Turkiye closed higher, while Denmark ended flat.

In the UK market, Natwest Group tumbled more than 8%, HSBC Holdings lost 6.5%, Standard Chartered ended down nearly 6% and Lloyds Banking Group lost 5.7%, while Barclays closed 4.7% down after posting a fall in second-quarter profit.

Melrose Industries tanked 12.5% and Schrodders plunged 9.7%. Antofagasta, Prudential, EasyJet, Glencore, IMI, ICG, Beazley, IHG, Entain, Ashtead Group and Weir Group lost 2.5 to 4.7%.

Next rallied nearly 8.5% after raising its guidance for the year. Smith & Nephew gained about 6.8% on strong half-year results.

Rolls-Royce Holdings gained 7% after the aerospace engineer raised its profit guidance and announced it would restart dividends in its results for the full year.

Haleon, British American Tobacco, Kingfisher, Barratt Developments, Mondi, LondonMetric Property and AstraZeneca advanced 1 to 2.5%.

In the German market, Deutsche Post fell 6.25% after reporting its earnings results for the second quarter.

Commerzbank ended down 5.4%. Fresenius, Fresenius Medical Care, Hannover Rueck, Daimler Truck Holding and Deutsche Bank lost 3 to 4.5%.

BMW lost about 3% after its auto unit reported slightly lower-than-forecast profitability in the second quarter. Volkswagen ended nearly 4% down, after second-quarter operating profit fell amid higher costs.

Siemens Energy, Infineon, Munich RE, Mercedes-Benz, E.ON, Allianz, Adidas, HeidelbergCement, Continental, PUMA, SAP, BASF and Beiersdorf ended down 1.7 to 3%.

Zalando climbed more than 3%. Vonvoia and Merck gained about 2.4% and 1.5%, respectively.

In the French market, Societe Generale plunged 9% after cutting the outlook for its French retail activities.

Safran, ArcelorMittal, Airbus, Schneider Electric, Saint Gobain, STMicroElectronics, L’Oreal and BNP Paribas ended down 3 to 5%.

Shares of environmental-services giant Veolia ended down 3% after the company backed its FY outlook after reporting a 10 percent increase in first-half earnings.

Teleperformance, Legrand, Renault, Kering, Accor, Vinci, Vivendi, Edenred, Bouygues, Air Liquide, Publicis Groupe, LVMH, Capgemini and Stellantis also declined sharply.

The eurozone manufacturing sector remained in contraction territory in July, according to a survey released today.

HCOB’s final manufacturing PMI came in unchanged from June at 45.8, a tad higher than the preliminary estimate of 45.6.

Separate data from Eurostat showed the euro area unemployment rate rose slightly in June. The unemployment rate posted 6.5% in June, up from 6.4% in May. The rate was unchanged from June 2023.
The UK manufacturing sector’s activity expanded at an accelerated pace in July on the back of robust growth in output and new orders. The manufacturing purchasing managers’ index climbed to 52.1 in July from 50.9 in June.

UK house prices increased for the third straight month in July, suggesting stabilization in the housing market, data from Nationwide Building Society showed.

House prices posted a monthly growth of 0.3% after rising 0.2% in June. This was the third consecutive increase and faster than forecast of 0.1%.