European shares fall to one-month low as ECB’s signal on rate cut hits bank stocks

Europe’s benchmark stock index fell to a one-month low on Thursday as banks took a hit after the European Central Bank (ECB) held rates steady but signalled imminent cuts, while Deutsche Telekom dropped to a five-month low after trading without entitlement to a dividend.

The ECB maintained interest rates at record high as expected, but signalled it may soon start to cut them, although investors questioned whether stubborn US inflation rates would stop the Federal Reserve from following close behind.

Dublin

The Iseq index closed 1.6 per cent lower as bank stocks declined in line with the trend across Europe after the ECB hinted at interest rate cuts from June. Bank of Ireland shed 2.6 per cent to close at €9.82, while AIB finished 3.3 lower at €4.83.

Ryanair was also a drag on the index, easing back 3.3 per cent to €20.84, having advanced 1.1 per cent in the previous session.

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Kingspan edged 0.5 per cent lower to €83.20, but Kerry Group was among the climbers, posting a 2.75 per cent gain in the session to close at €80.35. Packaging group Smurfit Kappa rose 1.1 per cent to €41.65.

London

The UK’s FTSE 100 edged 0.5 per cent lower as investors awaited Britain’s economic figures for hints on the path of domestic monetary policy after the ECB indicated it may soon start to cut rates.

British banking and insurance stocks fell the most, echoing a weak mood among European financial stocks. The UK banks index fell 2.7 per cent, recording its biggest percentage drop in almost two months.

Several heavyweights including Aviva, Lloyds Banking Group and Reckitt Benckiser also fell as they traded without entitlement for dividend.

Darktrace surged 6.3 per cent after the cybersecurity company raised its annual revenue and margin forecasts for the third time this year.

AstraZeneca rose 2.1 per cent after the drugmaker said it planned to increase its annual dividend by 7 per cent for 2024.

Europe

The pan-European Stoxx 600 closed 0.4 per cent lower in volatile trade, with the banking sector taking the biggest hit, falling 2.4 per cent and notching its steepest one-day drop in over eight months.

The indexes of top economies in the euro zone such as Germany, France, Italy and Spain were also down between 0.3 per cent to 1.2 per cent.

The telecoms sector also shed 2.1 per cent, dragged down by a 6.2 per cent drop in Deutsche Telekom as the company traded ex-dividend.

Equities were also dented by higher euro zone bond yields as expectations for a higher-for-longer scenario for US interest rates more than offset the ECB’s remarks.

Ambu climbed 4.6 per cent after the Danish maker of single-use endoscopy solutions hiked its full-year outlook and posted preliminary second-quarter financials.

Lufthansa dropped 2.7 per cent after the German carrier extended a suspension of its flights to Tehran, with the Middle East on alert for Iranian retaliation for a suspected Israeli air strike on the country’s embassy in Syria.

US

The benchmark S&P 500 and the Dow were muted in early trading on Thursday after long-dated Treasury yields remained elevated following the latest economic data as well as commentary from Federal Reserve policymakers.

New York Federal Reserve president John Williams said that while the US central bank had made considerable progress in lowering inflation it did not yet need to move to an easier monetary policy setting given the recent uneven price pressure movements.

Richmond Fed president Thomas Barkin said the latest inflation data showed the Fed is “not yet where we want to be”, and that it was unsure that inflation would continue to ease.

Gains across chipmakers and mega-cap growth stocks such as Nvidia and Alphabet helped the Nasdaq rise 0.5 per cent.

Globe Life slumped 19.5 per cent after Fuzzy Panda Research disclosed a short position in the company, alleging multiple instances of insurance fraud.

Additional reporting: Reuters

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