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European markets decline on Thursday after brief rise on Wednesday

Major European stock indexes have declined on Thursday as market players continued to digest the Federal Reserve's monetary policy decisions.

At the moment of writing, the STOXX Europe 600 decreased by 0.72% to 404.1 points.

The CAC 40 lost 0.76%, while the DAX and the FTSE 100 fell by 0.51% and 0.47% respectively.


Biggest gainers and losers

Shares of Finnish energy company Fortum Oyj jumped by 7.4%.

The share price of Credit Suisse Group AG declined by 3%. Earlier, UK media reported that the Swiss bank considered splitting its investment bank into three and sell profitable units to prevent a damaging capital raise.

The market cap of Accor S.A. slumped by 7.4% after JP Morgan revised the French hotel chain's rating to "underweight" from "neutral"

Shares of HSBC lost 1.3% following reports that the UK's biggest bank would stop financing the expansion of thermal coal from funds it manages actively.

JD Sports dived by 6.3% after the UK sportswear retailer reported that its revenues fell by 6.3% in January-June 2022 amid soaring inflation and falling consumer spending.

Market sentiment

European investors continued to analyze the results of September's policy meeting of the Federal Reserve.

Yesterday, the US regulator hiked the key interest rates by 75 basis points to a target range of 3.00% to 3.25%, the highest range since 2008.

Furthermore, the Fed revised its US GDP outlook downwards and increased its inflation and unemployment outlook for 2022-2023. Fed policymakers stated that the regulator would continue to reduce its balance sheet, including federal agency bonds. The Federal Reserve's statement signalled investors the potential trajectory of interest rates amid constantly rising inflation.

The Fed hiked interest rates by 25 bps in March, 50 bps in May, and 75 bps in June.

US stock indexes slumped on Wednesday, adding additional pressure on the European market the following day. On Wednesday, the Dow Jones Industrial Average and the S&P 500 lost 1.7%, while the NASDAQ Composite decreased by 1.8%.

Today's key economic event is the policy meeting of the Bank of England. Analysts expected the UK regulator to hike interest rates by another 75 bps to quell soaring inflation.

Furthermore, the BoE would have to adjust its plans in accordance with the new policies by the Liz Truss's government, which plans to cap energy prices.

During its meeting in August, BoE policymakers forecasted that inflation would peak at 13.3% by the end of 2022. The UK economy was expected to enter a recession that would last until early 2024.

The Swiss central bank increased the interest rate by 75 bps to 0.5% on Thursday in its second consecutive move. In June, the regulator hiked interest rates by 50 bps to -0.25%. Inflation in Switzerland reached 3.5% y/y in August, the highest level in 30 years.

Today's key data release in the EU is the eurozone consumer confidence data. The indicator is expected to fall to -25.8 in September from -24.9 in August.

Tomorrow, UK and EU PMI data will be released. The EU PMI has been hovering below 50, the level separating economic contraction and expansion. EU recession risks have increased to the highest level since July 2020.

Wednesday's trading session

European indexes finished Wednesday in positive territory.

The STOXX Europe 600 increased by 0.9% to 407.05. The best performing stocks on the STOXX Europe 600 were S4 Capital PLC (+12%), Rheinmetall AG (+9.3%), and Telecom Italia S.p.A. (+6%).

The CAC 40 advanced by 0.87%, the DAX increased by 0.76%, and the FTSE 100 gained 0.63%.

Shares of Uniper SE plunged by 25.3% after reports that the energy company is finalizing talks with the German government on buying the controlling stake in the company, opening the way for full nationalization.

E.ON advanced by 1.8% following reports that the German energy company extended the contract of CEO Leonhard Birnbaum until June 30, 2028.

The market cap of Schneider Electric and Avela rose by 1.9% and 2.3% respectively after Avela's shareholders approved the acquisition of the company by Schneider for $10.8 billion.

Shares of Lloyds rose by 0.4%, while the share of Societe Generale and UBS fell by more than 1.5%.

The share price of Fortum Oyj jumped by 9.5%.

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