European shares slide as hawkish c.banks spark interest rate jitters

By Bansari Mayur Kamdar and Shashwat Chauhan

(Reuters) – European shares fell over 1% in a broad-based selloff on Thursday, pressured by rising bond yields as major central banks across the world hinted at keeping borrowing costs elevated for longer.

The pan-European STOXX 600 index closed 1.3% lower, with travel and leisure stocks shedding 3.2%.

Mining stocks dipped 2.6% as metal prices weakened against a stronger dollar. [MET/L]

Euro zone bond yields rose to multiple-month highs after the U.S. Federal Reserve and the Bank of England (BoE) kept rates unchanged but flagged more hikes could come as the central banks continue to worry about inflation. [GVD/EUR]

The UK’s blue-chip FTSE 100 lost 0.7%, its first fall in three sessions.

Elsewhere in Europe, the Swiss National Bank (SNB) kept its policy interest rate unchanged at 1.75%, while Sweden and Norway’s central banks raised their key policy rate by a quarter percentage point.

“We have seen a lot of central banks entering in a pause, however, there is still modest upside risks related to the inflation behaviour over the next months, but I would say that globally, it’s still positive for equities,” said Patrice Gautry, chief economist at Union Bancaire PrivĂ©e in Geneva, Switzerland.

“What was less positive was that these pauses came with the mantra of key rates remaining higher for longer, that is to say that central banks are not ready to cut very rapidly.”

Swiss stocks fell 0.6%, while shares in Sweden and Norway lost 1.1% and 0.9%, respectively.

Rate-sensitive technology stocks dropped 1.3%, while real-estate slumped 1.2%.

Europe’s STOXX volatility index rose to over one week highs on Thursday.

Meanwhile, European Central Bank (ECB) governing council member Klaas Knot said the central bank will most likely keep interest rates stable at its next policy meeting.

A separate reading showed euro zone consumer confidence fell by 1.8 points in September from the August number.

Among individual stocks, Ocado tanked 19.9% after Exane downgraded the British online supermarket to “underperform” following its recent rally, citing concerns over subdued growth in its retail business.

JD Sports climbed 9.0% after saying it was on track to post higher annual profit as demand for branded footwear and apparel pushed underlying sales up 12% despite pressure on consumers from rising bills.

Retailer Next rose 3.4% on hiking its annual profit guidance.

(Reporting by Bansari Mayur Kamdar and Shashwat Chauhan in Bengaluru; Editing by Savio D’Souza, Sonia Cheema and Sharon Singleton)