European markets open to close; Bank of England interest rate decision

LONDON — European stocks closed slightly higher on Thursday as uncertainty returned after the previous session’s gains.

The pan-European Stoxx 600 tentatively closed slightly above the flatline. Travel and leisure stocks were the best performers, gaining 1.9%, while oil and gas stocks fell 1.3%.

The relatively cautious mood for European stocks came after Wednesday’s gains amid strong US economic data that tamed investor fears of an impending recession. The ISM Non-Manufacturing Purchasing Managers Index showed a surprise rebound in July, also pushing US stocks higher.

The pound came under pressure against the dollar after the Bank of England raised interest rates by 50 basis points, its biggest increase since 1995, as it tried to contain runaway inflation which hit a new 40-year high of 9.4% in June. . This decision was widely anticipated by market players.

Britain’s FTSE 100 initially traded higher but later pared gains to close mixed.

The sixth consecutive increase takes borrowing costs to 1.75% and marks the first half-point rise since the Bank was made independent of the UK government in 1997.

The Bank issued a gloomy outlook for economic growth, suggesting the latest gas price hike has led to a further “significant deterioration” in the outlook for activity in the UK and the rest of Europe.

The MPC now projects that the UK will enter recession from the fourth quarter of 2022 and that the recession will last for five quarters, as real after-tax household income falls sharply in 2022 and 2023 and consumption starts to contract.

Elsewhere overnight, Asia-Pacific stocks closed higher on Thursday after Wall Street rallied and as investors moved away from tensions sparked by the controversial visit of the Speaker of the United States House, Nancy Pelosi, in Taiwan.

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Meanwhile, U.S. stocks were down on Thursday after major averages snapped a two-day slump in the previous regular trading session.

Earnings before the bell came Thursday from Credit Agricole, Adidas, Bayer, Lufthansa, Merck, Zalando, Rolls-Royce, Next, Glencore and Adecco Group.

At the top of the Stoxx 600, Zalando stock jumped more than 13% after the German online retailer predicted a return to second-half profit growth, despite falling second-quarter profits and sales.

Ubisoft shares jumped 11% after Reuters reported that Chinese tech giant Tencent intended to increase its stake in the French company. Ubisoft declined to comment when contacted by CNBC.

Lufthansa shares soared more than 6% after the German posted a lower-than-expected quarterly loss.

At the bottom of Europe’s blue chip index, British aero-engine maker Rolls-Royce fell nearly 9% after reporting a bigger-than-expected drop in first-half profit.

– CNBC’s Ryan Browne contributed to this report.

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