European shares extend declines after ECB rate hike

By Shreyashi Sanyal

(Reuters) -European shares deepened losses on Thursday after the European Central Bank (ECB) raised borrowing costs as expected and signalled more policy tightening in its fight against sticky inflation.

The continent-wide index fell 0.6% by 1230 GMT.

The ECB increased the deposit rate by 25 basis points to 3.5%, the highest level in 22 years. This was the central bank’s eighth successive raise. Inflation in the euro zone is at 6.1%, more than three times the ECB’s 2% target.

Attention now turns to ECB President Christine Lagarde’s 1245 GMT news conference.

“No surprise,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank in Switzerland.

“Devil will be in the press conference: will the ECB keep its hawkish stance despite easing inflation and deteriorating economic outlook, or will the bank soften its hand?”

This arrives just as the U.S. Federal Reserve left interest rates unchanged on Wednesday but signalled increases totalling at least half a percentage point by the end of this year.

The euro STOXX volatility index, an equivalent of Wall Street’s so-called fear gauge , fell briefly to its lowest since the outbreak of the COVID pandemic in 2020.

Markets are eying more economic data and updates from major central banks to help the STOXX 600 break out of the 1% trading range that it has been stuck in for nearly two weeks.

The rate-sensitive technology sector index shed 1.7%, while the basic resources shares fell 1.5%.

Miners tracked a fall in base metals prices in London on poor economic data from top metals consumer China.

H&M jumped 3.2% after the Swedish clothes group said June had started well.

British technology company Halma slipped 4.7% as its annual margins outlook disappointed.

SoftwareOne shares surged 18.6% after Bain Capital Private Equity made an offer for the Swiss software management company, valuing it at 2.9 billion Swiss francs ($3.21 billion).

Informa Plc advanced by 2.4% after raising its annual profit and revenue forecast.