LONDON — European markets saw a decline on Thursday as investors await the Bank of England’s monetary policy decision.
The pan-European Stoxx 600 index was down 0.52% in early trading, with most major sectors in negative territory. Banks and auto stocks fell by 2.21% and 1.65%, respectively, while retail stocks gained 1.17%.
Rolls-Royce shares experienced a notable increase, rising more than 11% to reach an all-time high before slightly retreating. This surge followed the company’s announcement of a dividend reinstatement and an upward revision of its profit forecast due to strong first-half results.
The Bank of England is scheduled to announce its latest monetary policy decision at midday London time. Market expectations slightly lean towards a 25 basis point interest rate cut from the U.K. central bank, signaling the start of a potential easing cycle. However, analysts note increased uncertainty around the decision due to ongoing concerns about service sector inflation and wage growth, despite inflation remaining at 2%.
The Bank of England’s meeting follows the U.S. Federal Reserve’s recent decision to hold interest rates steady. Fed Chair Jerome Powell indicated that a rate cut in September remains a possibility, contingent on continued supportive inflation data. However, Powell suggested that a 50 basis point cut is unlikely.
Investors are also reacting to the Bank of Japan’s recent unexpected move to raise its benchmark interest rate to approximately 0.25%, the highest level since 2008. This decision strengthened the yen against the U.S. dollar and led to declines in Japanese stocks.
As central bank developments dominate the market, earnings season continues. On Wednesday, the tech-heavy Nasdaq Composite in the U.S. gained 2.64%, driven by strong quarterly results from Advanced Micro Devices and positive performance by Facebook owner Meta in extended trading.
European technology stocks also saw significant gains, with chipmaker ASML benefiting from a report suggesting potential exemption from U.S.-led Chinese export restrictions.
Additionally, oil major Shell and British bank Barclays are among the companies reporting earnings on Thursday.
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