(Bloomberg) -- European stocks pared a decline after the European Central Bank left interest rates unchanged for the first time in more than a year, and data showed the US economy grew at the fastest pace in nearly two years.
The Stoxx 600 slipped at in London, having earlier shed as much as 1.2% and coming to the brink of erasing all its gains for 2023. Automakers and luxury goods-makers fell the most, while real estate and chemicals outperformed.
ECB policymakers kept the deposit rate unchanged at a record-high 4% on Thursday, following last month's knife-edge decision to lift the rate.
“Unless there's an external shock to energy prices, we think the ECB is done with hikes for the current cycle,” said Wolf von Rotberg, equity strategist at Bank J. Safra Sarasin. “The first ECB cuts will likely only come in the second half of next year, with weaker data and softer markets before it gets better.”
Among individual movers, banks Standard Chartered Plc and BNP Paribas SA both saw sizable declines after reporting disappointing earnings. Advertising giant WPP Plc also edged lower after slashing its outlook for revenue growth.
Siemens Energy AG sank to a record low after seeking €16 billion ($16.9 billion) in state aid. The meltdown in its shares on Thursday was the biggest drop for a stock on Germany's DAX index since the collapse of Wirecard in June 2020. Its main share holder Siemens AG dropped as much as 5.9%.
European stocks are tracking their third straight month of declines on the back of higher bond yields and an underwhelming reaction to corporate earnings.
“The higher-for-longer interest rates environment is very dangerous for stocks as it significantly increases chances of recession and an earnings slump,” said Marija Veitmane, senior multi-asset strategist at State Street Global Markets. “We have a negative outlook on equity markets for the rest of the year.”
SECTORS IN FOCUS:
- Turkish equities after Wednesday's drop and as the central bank's Monetary Policy Committee meets to decide on interest rates.
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--With assistance from Michael Msika, Kit Rees, Jan-Patrick Barnert and Allegra Catelli.
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