European equities close down 0.4%, FTSE tries to hold on

• European equities hit a bearish note ahead of ECB rate call.
• Inflation remains a sticky complication for European central banks.
• The Bank of England is caught between a rock and an even bigger rock as inflation remains, but economy lags.

European equity indexes finished Wednesday broadly lower as investors brace for the latest rate call from the European Central Bank (ECB).

Equities turned sour in Europe following better-than-expected Consumer Price Index (CPI) figures from the US, where inflation data for the American continent clipped into a 14-month high. The German DAX and France’s CAC40 both ended Wednesday trading down around 0.4% on the day, and the pan-European Stoxx600 index ended the day down 0.3%. London’s FTSE 100 index managed to hold on for the day, ending a scant 0.02% in the red.

UK, EU inflation concerns remain elevated, rate policy looms

London’s equities are taking a breather, but investors remain cautious as inflation for the United Kingdom’s (UK) economy continues to prove stickier than expected, and economic calendar data for the British economy continues to flub expectations. The Bank of England (BoE) is left in a tough spot, with inflation necessitating further rate hikes, but a wobbly economy at risk of taking a further plunge if rate hikes continue. The FTSE 100 ended the day at £7,525.

On the European Union (EU) side, the ECB is facing rate troubles of its own. An internal leak earlier this week showed the European Central Bank is set to raise its inflation expectations for the continental economy as price gains continue to prove resilient in the face of ECB actions. 

The ECB is slated to release its latest rate call on Thursday’s market session, where investors will be keeping a close eye on statements. The ECB is still broadly expected to keep rates where they are for the time being, but background bets on a rate hike have been steadily increasing, and an upside surprise isn’t entirely off the table. 

The DAX ended the day down near €15,654 with the French CAC40 closing at €7,222. The Euronext 100 is similar down 0.4%, to €1,335, and the EU-broad EuroStoxx 600 slipped to €453.94.

The Automotive sector in Europe provided what little support European equities received on Wednesday, with the EU set to investigate improper electric vehicle (EV) subsidies that the Chinese government has been supplying to their domestic auto manufacturers, with the President of the European Commission Ursula von der Leyen stating that while they welcome competition, they were not open to a “race to the bottom”.

The British Petroleum (BP) oil company took the top of the energy sector in London recently, with the stock slipping on Tuesday following a surprise resignation from the company’s CEO, Bernard Looney. Looney has been accused of failing to disclose the nature of his personal relationships with some colleagues. BP’s stock is down nearly 3% for the day, clipping into £508.50 to settle the day.