Europe close: Stocks finish lower as ECB holds rates

(Sharecast News) - European shares ended fractionally lower on Thursday as investors digested the European Central Bank's decision to keep interest rates unchanged and assessed mixed economic data from across the bloc.

The Stoxx 600 slipped 0.1% to 574.83, with Germany's DAX down 0.02% at 24,118.89 and France's CAC 40 off 0.53% at 8,157.29.

London's FTSE 100 edged 0.04% higher to 9,760.06, supported by strength in energy and financial stocks.

ECB leaves rates unchanged, as expected

The ECB left its main refinancing rate at 2% and its deposit and marginal lending rates at 2.15% and 2.40%, respectively, as expected.

Policymakers said inflation remains close to the 2% target, while reaffirming a "meeting-by-meeting" approach to further policy moves.

The Governing Council noted that the eurozone economy "has continued to grow despite the challenging global environment," citing a robust labour market and prior rate cuts as key sources of resilience.

However, it warned that the outlook remains uncertain due to global trade tensions and geopolitical risks.

On the economic front, preliminary Eurostat data showed eurozone GDP grew 0.2% in the third quarter, beating forecasts of 0.1%, with Spain and France leading gains.

The EU economy as a whole expanded 0.3%.

Unemployment in the eurozone held steady at 6.3%, while economic sentiment improved modestly in October, with the European Commission's index rising to 96.8.

Morgan Stanley said the ECB remained "in wait-and-see mode," adding that "rates are now considered as neutral by most governors" and that any further cuts would face "a higher bar" following recent signs of resilient growth.

Global sentiment was shaped by news of a one-year trade truce between the United States and China after talks between presidents Donald Trump and Xi Jinping in South Korea.

The agreement included US tariff reductions on Chinese goods and a suspension of planned Chinese export controls on rare earth minerals.

Markets reacted cautiously, with investors welcoming a pause in tensions but questioning the durability of the deal.

Across the Atlantic, the Federal Reserve's 25-basis point rate cut on Wednesday was overshadowed by chair Jerome Powell's warning that another reduction in December was "not a foregone conclusion," a signal that tempered investor optimism and added to Thursday's subdued tone in Europe.

As Russ Mould, investment director at AJ Bell, put it: "No-one likes a party pooper, especially when they're standing in front of the punch bowl.

"That's the role taken on by Jay Powell, who poured cold water on the prospect of a December rate cut.

"That's put markets on the back foot when it looked like the music was just about to ramp up."

Mould added that "the Fed did announce an interest rate cut, but short-term Treasury yields jumped up on the back of the hawkish tone, and Jay Powell's comments might well have elicited a hoot of derision from somewhere in the White House."

He noted Powell likened the situation to "driving in the fog," as the US government shutdown had restricted the release of key economic data.

"Gilt yields jumped up in the UK too, as Powell's comments reverberated across the Atlantic, highlighting just how sensitive our own government's borrowing costs are to Federal Reserve policy," Mould said.

On London's performance, Patrick Munnelly, market strategy partner at TickMill, said "the UK stock market is showing signs of recovery after briefly dipping into negative territory on Thursday."

He added that the rebound came "as investors digest the latest earnings reports from domestic and international companies, alongside fresh regional economic data," and that markets were also "evaluating the Federal Reserve's recent interest rate cut and its guidance on future monetary policy."

Standard Chartered in the green as earnings reports steal the show

In equities, Standard Chartered rose after reporting a stronger quarterly profit and an upgraded income and return outlook.

"The bank reported a profit of $1.03bn attributable to ordinary shareholders, a 10% increase from $931 million in the same period last year," Munnelly said, noting that "basic earnings per share also climbed 7.7%, reaching 44.5 US cents compared to 36.8 US cents a year ago."

Haleon, ING Groep, Shell, and Airbus also gained on upbeat results, supporting the FTSE 100, with Shell delivering adjusted earnings of $5.4bn.

Losses in Anheuser-Busch InBev, BBVA, Credit Agricole, Schneider Electric, Societe Generale, Volkswagen, and WPP weighed on broader indices.

WPP slumped after cutting its full-year sales guidance, a move that drew sharp commentary from AJ Bell's Mould.

"It's rare to see a trading statement where the CEO calls out performance as unacceptable, but that's perhaps the luxury afforded a new boss who can say it didn't happen on their watch, and wants to grasp the opportunity to set out a new strategic direction," he said.

"Cindy Rose pulled no punches in her assessment of WPP's numbers, and tried to guide the market towards a strategic review and the potential for a rosier future.

"The market's verdict concurred the figures were unacceptable and promptly marked the share price down by 10%, taking it to a place where it has fallen by 60% this year, putting WPP in real danger of losing its spot in the FTSE 100."

Reporting by Josh White for Sharecast.com.