European stock markets declined on Thursday following the European Central Bank's second interest-rate hike of the year, as persistent inflation worries and elevated oil prices continued to dampen investor sentiment.
The EuroStoxx 50 fell 0.67% to 6,268.97 points, extending losses after reaching its lowest level since late July the previous day. Outside the euro area, Britain's FTSE 100 lost 0.57% to 10,608.92, while Switzerland's SMI dropped 0.47% to 13,740.10, already at its lowest since June.
Brent crude has risen above $100 a barrel, adding to inflationary pressures that prompted the ECB's latest tightening move. In Germany, soaring energy costs pushed inflation to the 3% mark in August, and analysts warn further monetary tightening remains likely. Christian Lips, chief economist at NordLB, raised the probability of another rate hike in December, stating the door remains wide open.
"The conflict in the Middle East continues to generate inflationary pressure, and inflation is likely to remain significantly above our target for an extended period," ECB President Christine Lagarde said, adding that the outlook remained "characterised by high uncertainty." Ulrich Kater of Dekabank described the ECB as being "in an unenviable position," noting that higher rates would weigh on an already weak economy.
Mining stocks were among the hardest hit, with the sector index trailing the market by 3.7%, making it the worst-performing industry segment. Falling metal prices — particularly copper and silver — weighed on the sector, compounded by a delayed US decision on additional tariffs. In London, shares of Rio Tinto and Glencore fell as much as 4.1%.
Defensive sectors stood out on the bright side. Telecommunications and insurance posted gains, while automotive stocks also advanced modestly. UBS analyst Patrick Hummel anticipates that the EU will soon introduce regulatory measures to bolster the regional auto industry, likely taking a protectionist direction.
Among individual names, AB Foods plummeted nearly 8% on the London Stock Exchange after the food and retail conglomerate slashed its forecasts for both its sugar and food retail divisions. Its discount clothing chain Primark continues to suffer from sluggish consumer demand, especially across Europe.
