European stock markets mixed as ECB leaves interest rates unchanged

·Contributor
·4-min read
People walk next to the Thames with London's financial district in the background
People walk next to the Thames with London's financial district in the background. Photo: Thomas Krych/SOPA Images/LightRocket via Getty Images

European stock markets were mixed on Thursday as the European Central Bank’s (ECB) held interest rates unchanged, and kept other monetary policy tools on hold.

In London, the FTSE 100 (^FTSE) closed 0.4% lower, falling back below the 7,000 points mark, while the French CAC (^FCHI) rose 0.3% and the DAX (^GDAXI) gained 0.6% in Germany, off their session highs.

It came as the ECB also pledged to keep rates low "until inflation hits new 2% target". Net purchases under the banks asset purchase programme will also continue at a monthly pace of €20bn. 

The Pandemic Emergency Purchase Programme (PEPP) was maintained at €1.85tn (£1.6tn, $2.2tn) and the asset purchase programme was kept at €20bn a month.

ECB president Christine Lagarde also warned that the Delta variant of COVID-19 is casting "a shadow" over Europe's economic recovery.

"The recovery in the eurozone economy is on track," Lagarde said during a press conference on Thursday. "But the pandemic continues to cast a shadow, especially as the Delta variant constitutes a growing source of uncertainty.

"The Delta variant of the coronavirus could dampen the recovery in services, especially in tourism and hospitality."

Watch: What is inflation and why is it important?

A string of corporate news was also moving individual stocks on Thursday, with Go Ahead Group (GOG.L) up 0.5% on the back of an announcement appointing a new chief executive officer.

Meanwhile, Unilever (ULVR.L) slumped 5.9%, the biggest loser on the index in morning trading, after warning rising commodity costs would squeeze its full-year operating margin. However, it beat expectations with second-quarter sales growth, helped by higher prices and strong sales of ice-cream and teas.

Read more: Unilever reveals profit margin hit amid rising commodity prices

Elsewhere, British factories recorded their strongest growth in new orders since the 1970s, with domestic orders growing at the fastest pace ever, according to the latest data from the CBI.

Manufacturing output volumes continued to grow at the quickest pace on record in the three months to July, matching June’s growth. However, firms continue to face significant cost pressures, due to ongoing global supply disruption.

"Manufacturers reporting a surge in 16 out of 17 sub-sectors favourably supports the economic recovery. The manufacturing output is expected to grow at an even faster rate in the next three months as a large section of enterprises will seek to revamp their pre-pandemic level commercial operations subsequent to the withdrawal of lockdown restrictions," said Kunal Sawhney, CEO of Kalkine group.

"On the contrary, the invariable concerns surrounding the availability of skilled labour, raw materials and components can weigh on the volume as the sector struggles with acute cost pressures with the rising inflation in the country, as well as across the major economies of the world."

Watch: UK factories suffer worst quarter on record – CBI in June

Across the pond, the S&P 500 (^GSPC) was trading flat and the Nasdaq Composite (^IXIC) rose 0.2% as tech stocks continued to climb. The Dow Jones (^DJI) edged down 0.2%.

The number of Americans filing new unemployment claims in the last week jumped, in a sign that the labour market remains volatile as the pandemic rolls on.

There were 419,000 fresh initial claims for jobless support, on a seasonally adjusted basis, the US Labour Department data showed on Thursday. This was an increase of more than 50,000 compared with the previous seven days, when there were 368,000.

Continuing claims for state benefits fell to 3.24 million in the week ending 10 July.

"The market is realising that it's very unlikely that this variant is going to have a similar outcome to the original pandemic," said Tom Mantione, managing director at UBS Private Wealth Management in Stamford, Connecticut.

"We've got a lot of runway to the US economy both in the labour market and earnings, and now is the time to be buying the dip. If you weren't buying on Monday, you were kind of missing the point."

Read more: ECB's Lagarde warns Delta variant casting 'shadow' over Europe's recovery

Asian stocks rallied overnight despite outbreaks in unvaccinated populations and jitters around China's regulatory crackdown on technology firms. Bonds nursed losses and oil held on to gains on Thursday as investors seemed to set aside coronavirus concerns.

MSCI's broadest index of Asia-Pacific shares outside Japan took their lead from Wall Street, rising 1%, with broad gains from Sydney, Seoul and Hong Kong.

The Hang Seng (^HSI) rose 1.6% while the Shanghai Composite (000001.SS) was 0.3% higher and the Nikkei (^N225) climbed 0.6% in Japan.

Watch: What are SPACs?

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