European equities shift lower on Thursday after euro area inflation slows less than expected

• European stocks shed weight after EU HICP inflation remains above 3%.
• The BoE voted to hold rates on Thursday with some contention.
• BNP Paribas tumbled after sales miss, Volvo soared after pulling Polestar funding.

European indexes broadly shed points on Thursday after investor sentiment soured with mixed Europe earnings vexing investors and inflation continues to weigh on markets hoping for rate cuts from central banks to ease financing costs.

The Bank of England (BoE) voted for both rate cuts and rate hikes at the same time on Thursday, marking the first time since 2008 UK central bank policymakers spread their votes into both rate move camps. With 6 no-change votes and rate hike votes outnumbering rate cut votes 2-to-1, markets broadly readjusted their expectations for rate cuts from the BoE, but money markets still see four rate cuts through the end of 2024.

Bailey Speech: BoE Governor speaks on interest rate outlook

Deutsche Bank shares rose 4% on Thursday after it was announced that the European bank would be slashing over three thousand jobs in their back office, equivalent to nearly 4% of their entire workforce, to return €1.6 billion in value to shareholders after fourth-quarter earnings declined 30% QoQ, a decline that still outperformed expectations.

BNP Paribas declined 8% and saw its shares briefly halted according to reporting by Reuters. The French bank also reported a QoQ sales miss, but didn’t offer to terminate a portion of their staff list to make up the loss for shareholders.

Volva shares climbed over 25% after announcing it would pull funding from ailing subsidiary Polestar. Volvo plans to hand the reins of Polestar over to Geely Holding, a Chinese investment company with a nearly 80% stake in Volvo.

Euro area inflation falls, but less than hoped

European inflation eased less than markets hoped in January, with the pan-European Harmonized Index of Consumer Prices (HICP) coming in at 3.3% for the year ended in January versus the forecast 3.2% and etching in a minor decline from the previous period’s 3.4% YoY.

London’s FTSE decline 8.41 points to close Thursday down 0.11% at £7,622.16, with the German DAX shedding 0.26% and closing down 44.72 points at €16,859.04.

The STOXX600 pan-European major equity index fell 0.37%, or 1.81 points to close at €483.86, with France’s CAC40 tumbling 0.89% and shedding 68 points, wrapping up Thursday at €7,588.75.

FTSE technical outlook

The FTSE’s minor decline on Thursday keeps the UK’s major equity index trapped in near-term consolidation, capped by a resistance level baked into £7,680.00.

The equity index remains in bullish territory above the 200-hour Simple Moving Average (SMA) near £7,560.00. 

On daily candlesticks, the FTSE is primed for a fresh decline back into the 200-day SMA near £7,550.00 with the UK’s large-cap index stuck in a month’s long cyclical pattern.

FTSE hourly chart

FTSE daily chart