ECB decision nervousness weighs on European shares

By Susan Mathew

(Reuters) -European shares slipped on Thursday ahead of the European Central Bank’s meeting later in the day, with investors awaiting clues on the central bank’s policy tightening plans.

The pan-European STOXX 600 index fell 0.8%, on course to mark its third straight session of losses.

Markets globally weakened ahead of the decision, with new COVID-19 curbs in Shanghai adding to recession worries. Asian shares slipped, U.S. Treasuries fell as did U.S. stock futures, while the safe-haven dollar surged to two-decade highs.[MKTS/GLOB]

As euro zone inflation hit record highs, money markets have now priced in 75 basis points of hikes from the ECB by October, from earlier expectations of 25 bps hikes at its July and September meetings. Data showing strong first-quarter economic growth in the euro zone lent weight to the hawkish bets.

“The equity market will remain nervous through the meeting,” Azad Zangana, a senior European economist and strategist at Schroders, said.

He added that there might be some divergence between core and periphery stocks if the ECB does not announce a measure to help to close the spreads between peripheral government bond yields, like Italy and those in the core.

Economies such as Germany and France are considered “core” in Europe.

Oanda’s senior market analyst Jeffrey Halley said if the ECB delivers a hawkish surprise, European equities are likely to remain pressured.

The ECB’s decision is due at 1145 GMT, followed by a press conference at 1230 GMT.

Losses in Europe were largely broad-based and led by China-sensitive miners and luxury stocks.

French luxury group Kering slipped 0.9%, with investors looking for details on its main label and profit engine, Gucci, which suffered more than rivals during a recent round of lockdowns in China. Kering aims to double sales for its smaller fashion brand Saint Laurent, it said on the first day of an investor presentation on Wednesday.

The energy index hit over 3-1/2-year highs and was the sole gainer, up 0.1%. TotalEnergies cheered an “outperform” rating from Credit Suisse and was the top boost to the STOXX 600. [O/R]

British American Tobacco rose 0.8% after it said it was confident of delivering its financial targets irrespective of how long it takes to offload its Russian unit.

Lender Credit Suisse’ shares fell 3.7% on growing skepticism of a takeover from U.S. financial giant State Street after a media report on Wednesday boosted the heavily-shorted stock from a near 20-year low.

(Reporting by Susan Mathew in Bengaluru; editing by Uttaresh.V)