European stocks close lower on earnings disappointment and concerns over policy tightening

(RTTNews) – European stocks fell on Thursday, weighed down by a selloff in technology after Facebook reported weak earnings and provided a disappointing revenue forecast for the current quarter.

Markets also digested monetary policy announcements from the Bank of England and the European Central Bank, as well as the latest batch of economic data from the region.

The Bank of England’s Monetary Policy Committee today decided to raise the key rate from 0.25% to 0.5% and signaled ‘modest tightening’ in the coming months. While five members, including Governor Andrew Bailey, called for a 25 basis point increase, four other panel members voted for a larger 50 basis point increase.

The bank had raised its rate by 0.15 percentage points at its December meeting, which was the first such action since August 2018. The bank said it intended to reduce its holdings of US bonds. in a progressive and predictable way.

The European Central Bank left its key interest rate and forecasts unchanged. The main refinancing rate thus remains at zero, the deposit rate at -0.50% and the marginal lending rate at 0.25%.

The bank expects the key ECB interest rates “to remain at their current levels or lower until inflation reaches 2%…that progress in underlying inflation are sufficiently advanced to be compatible with a stabilization of inflation at 2% in the medium term.”

As announced in December, the bank announced that it would stop buying assets as part of its recovery plan against the Covid-19 pandemic at the end of March.

The pan-European Stoxx 600 index fell 1.76%. Britain’s FTSE 100 fell 0.71%, Germany’s DAX ended down 1.57% and France’s CAC 40 slid 1.54%, while the Swiss SMI fell 1.02%.

Among other markets in Europe, Austria, Belgium, Denmark, Finland, Greece, Iceland, Ireland, Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden and Turkey ended with strong to moderate losses, while the Czech Republic reversed the trend and closed slightly higher.

In the UK market, Flutter Entertainment, Croda International, Dechra Pharmaceuticals, RightMove, Auto Trader Group, Scottish Mortgage, Ocado Group, Ashtead Group, Experian, Halma, Aveva Group and Bunzl fell 3-5.3%.

BT Group lost nearly 5% after entering exclusive talks with Discovery to create a joint venture between BT Sport and pan-European TV network Eurospor.

AstraZeneca, Ferguson, Evraz, Spirax-Sarco Engineering, Fresnillo and Antofagasta also fell sharply.

Compass Group jumped more than 8% after its performance in the first quarter of fiscal 2022 improved from the previous quarter.

Shell gained 1.5% after reporting a sharp rise in full-year profits. The company also increased its dividend and announced a share buyback program.

Rolls-Royce Holdings gained 1.3%. Vodafone Group, Lloyds Banking Group, Land Securities and BP also closed higher.

In the German market, Infineon Technologies fell more than 4% despite reporting higher first-quarter profit and improving its revenue outlook for the year.

Zalando ended with more than 4% decline. Sartorius, HelloFresh, SAP, Symrise, Siemens Healthineers, Qiagen, Adidas, Brenntag and Siemens also ended sharply lower.

Meanwhile, Deutsche Telekom and Deutsche Bank gained 3.5% and 2.5% respectively. Deutsche Wohnen, Fresenius, RWE and Daimler also closed higher.

In Paris, Atos fell more than 5% and WorldLine ended down 4.4%, while Capgemini, STMicroElectronics, Dassault Systèmes and Technip lost 2 to 4%.

Renault, Engie and Sodexo gain more than 2%. Publicis Groupe rose nearly 2% after the ad agency said it expects first-quarter organic growth to be slightly above the full-year guidance range.

Societe Generale, Crédit Agricole, LO’real, Orange, Michelin and Saint Gobain gain 0.7 to 2%.

In the Swiss market, drugmaker Roche fell sharply after saying it expected slower sales growth in 2022.

In Stockholm, Skanska rose strongly after reporting higher-than-expected profits.

Finnish telecom equipment maker Nokia fell sharply despite a profit of 680 million euros in the fourth quarter, against a heavy loss of 2.70 billion euros last year.

Final survey data from IHS Markit showed that the eurozone private sector eased in January as the Omicron variant of COVID-19 limited activity, notably in the services sector.

The composite production index fell to 52.3 in January from 53.3 in December. The flash score was slightly lower at 52.4 flash. The Services Purchasing Managers’ Index came in at 51.1, down from 53.1 in December and the flash 51.2.

Germany saw some rebound in business activity in January, returning to growth territory after the slight decline in December. The composite production index rose to 53.8 from 49.9 the previous month. The flash reading was 54.3.

The services PMI improved to 52.2, as initially estimated, from 48.7 in December.

In contrast, France lost momentum, Italy stagnated overall and Spain recorded its first contraction since last February.

France’s composite PMI came in at 52.7, in line with the flash estimate, and down from 55.8 a month ago. Similarly, the services PMI fell to 53.1 from 57.0 in December.

The recovery of the UK services sector has accelerated as pandemic-related restrictions have been eased and customer demand has rebounded, according to final data from IHS Markit.

The Chartered Institute of Procurement & Supply’s Final Services Purchasing Managers Index rose to 54.1 in January from a 10-month low of 53.6 in December. The score was also above the flash 53.3.

Overall private sector growth picked up slightly in January. The composite production index rose to 54.2 in January from 53.6 the previous month. The flash reading was 53.3.

Growth in the manufacturing sector has outpaced that seen in the services economy, with output expanding the most since July 2021.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

About Wanda Dufresne

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