LONDON — European markets turned lower on Thursday as investors processed a raft of central bank action, including the Bank of England’s first interest rate cut in four years.
The pan-European Stoxx 600 index was down 0.25% by 2:05 p.m. London time, with all major bourses and most sectors trading in negative territory. Banks shed 2.59%, while retail stocks added 2.15%.
Shares of Rolls-Royce jumped more than 11% to hit an all-time high after the company reinstated its dividend and raised its profit forecast on the back of strong first-half results.
On the other end, French payments firm Worldline fell to the bottom of the benchmark, shedding as much as18.7% at one point, after it cut its 2024 outlook. Societe Generale was also down over 8% after it downgraded its outlook for its French retail activities even as it beat second-quarter earnings estimates.
The Bank of England announced it was cutting interest rates, taking the key rate to 5% from a 16-year high of 5.25%. Markets had been pricing in a 61% probability of a 25-basis point cut ahead of the announcement. The Bank of England said that the Monetary Policy Committee voted for the cut with a five to four majority.
The BOE’s meeting comes in the wake of the U.S. Federal Reserve’s, which ended in a widely expected hold on rates. At his press conference, Fed Chair Jerome Powell said a rate cut in September — which traders view as near-certain — was “on the table,” as long as inflation data continues to support one. Powell appeared to rule out that the cut would be as large as 50 basis points, however.
Investors are still processing Wednesday’s surprise move from the Bank of Japan, which raised its benchmark interest rate to around 0.25%, its highest level since 2008, and hinted at more tightening to come. The decision powered the yen to a four-and-a-half month high against the U.S. dollar, as Japanese stocks tumbled.
As central banks dominate the macro picture, earnings season continues in full force.
In U.S. trade on Wednesday, the tech-heavy Nasdaq Composite leapt 2.64% as Advanced Micro Devices posted a strong quarter, while Facebook owner Meta rallied in extended trading on stronger-than-expected results.
European technology stocks also saw big moves on Wednesday, posting strong gains in Europe as chip firm ASML jumped on a Reuters report suggesting it may be exempt from U.S.-led Chinese export restrictions. Oil major Shell and British bank Barclays are among the firms reporting Thursday.