TLDR
- European stocks were mostly flat Thursday after a 1.4% selloff Wednesday
- The ECB is expected to raise rates by 25 basis points to 2.5%
- Brent crude stayed above $100 a barrel, keeping inflation fears high
- Associated British Foods dropped nearly 12% after weak Primark sales
- U.S. inflation data due Thursday and Friday could affect Fed rate expectations
European shares steadied on Thursday after their worst session in two months. Investors were waiting for the European Central Bank to announce its interest rate decision later in the day.
The pan-European STOXX 600 index traded largely flat at 639.79 points. It had fallen 1.4% on Wednesday as oil prices surged.
Brent crude climbed above $100 a barrel for the first time since July. That rise stoked fresh concerns about inflation and pushed investors to reassess how long central banks might keep rates high.
The ECB was expected to raise its key rate by 25 basis points, bringing it to 2.5%. The announcement was due at 12:15 GMT, followed by a press conference from ECB President Christine Lagarde at 12:45 GMT.
Markets were also watching for Lagarde’s comments on the inflation outlook. The key question was whether policymakers would signal more rate hikes to come or shift to a wait-and-see approach.
“It’s going to be the outlook that will be watched closely, whether this will follow a wait-and-see stance or whether there could be another hike,” said Susannah Streeter, chief investment strategist at Wealth Club in London.
Financial markets were pricing in one more rate hike later this year and one or two more in 2027.
Energy and Banking Sectors Move
The European energy sector rose 0.3%, supported by elevated oil prices. Iran and the United States launched their largest wave of attacks on shipping since their six-month conflict began, pushing oil prices higher.
Banking stocks performed well. Societe Generale gained around 1.6%, Deutsche Bank rose 1.3%, and Banco Santander added 0.7%.
Tech and Consumer Stocks Under Pressure
The tech sector faced pressure. ASML fell 1.1% and SAP dropped around 3%, two of the bigger decliners in the session.
Associated British Foods was the biggest mover of the day. Its shares fell nearly 12%, on track for their worst single-day drop since January. The cause was weak sales data from its budget fashion brand Primark.
D’Ieteren was among the best performers in the STOXX 600, rising nearly 5%. The Belgian holding company reported stronger half-year profits and named a new chief executive.
German inflation data came in at 2.9% in August, in line with forecasts.
U.S. producer price data was also due Thursday, with consumer prices scheduled for Friday. Traders were pricing in a 62% chance of a 25 basis point rate hike from the U.S. Federal Reserve at its September 15-16 meeting.
The ECB rate decision and Lagarde’s comments remained the main focus for markets as the session continued.
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