European equities experienced significant declines on Thursday, with numerous markets slipping to their lowest levels in weeks. This downturn reflects investor reactions to the recent policy declarations and economic forecasts from the Federal Reserve and the Bank of England, accompanied by the latest economic data from both Europe and the United States.
The pan-European Stoxx 600 index dropped 1.51%. In the UK, the FTSE 100 fell by 1.14%, while Germany’s DAX and France’s CAC each decreased by 1.35% and 1.22%, respectively. Meanwhile, Switzerland's SMI saw a 1.93% plunge. Other European markets, including those in Austria, Belgium, Denmark, Finland, Iceland, Ireland, the Netherlands, Norway, Spain, Sweden, and Türkiye, also experienced declines ranging from sharp to moderate.
Conversely, Russia’s market posted gains, while Greece, Poland, and Portugal remained stable.
The Bank of England kept its key interest rate steady, citing an expected continued rise in inflation and a stagnant economy during the fourth quarter. This follows rate cuts of a quarter point each in the previous months of November and August. The Bank noted that a measured approach to easing monetary policy was still warranted, and anticipates weaker GDP growth than previously estimated at year-end. The economy is projected to remain stagnant in the fourth quarter, contrasting with earlier growth predictions of 0.3% in November. Short-term forecasts predict a slight rise in headline inflation, with increased inflation rates, wage growth, and inflation expectations posing risks of sustained inflation.
In the US, the Federal Reserve reduced interest rates by 25 basis points on Wednesday but signaled fewer cuts than previously anticipated for next year. According to the Fed’s latest forecasts, interest rates are projected to range between 3.75% and 4% by the close of 2025, rather than the earlier prediction of 3.25% to 3.5% cited in September.
In the UK stock market, Pershing Square Holdings, Mondi, Ashtead Group, Marks & Spencer, British Land, Anglo American Plc, Antofagasta, Convatec Group, Informa, Airtel Africa, Experian, Halma, Fresnillo, Barclays Group, Glencore, and Relx experienced losses of 2% to 4%. Conversely, Severn Trent advanced by nearly 1%, with Imperial Brands, Hikma Pharmaceuticals, and Diageo recording modest gains.
Within Germany’s market, Infineon dropped almost 5%, while Vonovia, HeidelbergCement, Fresenius Medical Care, Siemens, Continental, Siemens Energy, and Sartorius declined between 2% and 3%. Other companies, including Deutsche Bank, Fresenius, Merck, Adidas, Bayer, BASF, Siemens Healthineers, Zalando, Munich RE, SAP, and Daimler Truck Holding, ended with losses ranging from 1% to 2%. Rheinmetall saw a gain of about 1%, whereas Covestro posted moderate increases.
In France, STMicroElectronics plummeted approximately 6% after U.S.-based Micron Technology announced a discouraging quarterly outlook, citing diminished consumer demand. Vivendi fell by 5.6%, and Stellantis recorded a nearly 3% loss following a sales dip in November. Schneider Electric, Legrand, Unibail Rodamco, and Saint-Gobain experienced declines of 2% to 3%. Although Renault initially gained, it closed down by about 1.1%, amid reports of potential negotiations between Foxconn and Renault's major shareholder regarding Nissan Motor Co. shares. Further prominent declines were noted in companies such as ArcelorMittal, Dassault Systemes, BNP Paribas, Publicis Groupe, Essilor, Carrefour, Michelin, Safran, Edenred, and LVMH. On a positive note, Capgemini, Thales, Eurofins Scientific, and Pernod Ricard ended on higher notes.
Regarding economic indicators, confidence among French manufacturers remained stable in December, maintaining the level achieved in November, according to data from INSEE. The manufacturing sentiment index held steady at 97, below its long-term norm of 100, but exceeded expectations of 96.
In Germany, consumer confidence saw a slight uptick towards the year's end and is anticipated to continue rising in January, as per a survey from GfK and the Nuremberg Institute for Market Decisions. The consumer sentiment index improved to -21.3 for January, up from -23.1 in December, with forecasts predicting a further rise to -22.6.
The eurozone's current account surplus dropped to EUR 26 billion in October, from EUR 39 billion in the preceding month. A decrease in goods trade surplus to EUR 30 billion from EUR 32 billion was noted, while services surplus remained unchanged at EUR 15 billion. However, primary income shifted to a EUR 5 billion deficit from a surplus of the same amount previously.
Switzerland's foreign trade surplus notably fell in November, as exports diminished more substantially than imports. The trade surplus shrank to CHF 4.0 billion in November from CHF 6.0 billion in October, with exports significantly dropping by 10.8%, reversing the prior month's 11.4% decline. Imports recorded a 2.8% decrease, their first in three months.
In Europe, new car sales slid in November after recovering in the previous month, with a year-over-year decline of 1.9% or 869,816 units, reverting from a 1.1% increase in October. France exhibited the most considerable drop among major markets, down 12.7%, followed by Italy with a 10.8% fall.
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