European equity markets showed modest losses ahead of the European Central Bank's policy meeting later in the day. The EuroStoxx 50 fell 0.2 percent to 6,301 points, the UK's FTSE 100 dropped 0.4 percent to 10,629 points and Switzerland's SMI slipped 0.2 percent to 13,771 points.
Market participants widely expect the ECB to raise its key interest rate by 0.25 percentage points to 2.50 percent, marking the second increase this year. Analysts cite the region's solid economic performance and inflation that remains clearly above the ECB's target as reasons for a tighter monetary stance. Concerns were expressed that the ongoing Middle East conflict and persistently high energy prices could trigger fresh price spikes and entrench inflation at elevated levels.
The outlook from investors points to further rate increases, with expectations of two additional hikes in the coming year.
In individual stocks, Associated British Foods (AB Foods) declined roughly 11 percent in London after lowering its forecasts for the sugar and food divisions, with its discount chain Primark continuing to suffer from weak consumer demand, especially in Europe.
Sector performance was mixed. Automobile shares rose about 1.0 percent, oil‑linked equities edged up 0.4 percent on the back of higher crude prices, while technology stocks fell 0.8 percent, making it the weakest group.
