FRANKFURT: European shares suffered their steepest one-day drop in over two weeks on Thursday, weighed down by lacklustre earnings, hawkish central bank commentary and elevated crude oil prices.
The pan-European STOXX 600 index fell 1.3 percent to 638.5 points. The index has struggled to break out of a narrow range this month as simmering tensions in the Middle East reinforce inflation fears.
While the European Central Bank kept interest rates unchanged on Thursday, markets perceived President Christine Lagarde’s comments as suggestive of a potential hike in September.
“The ECB is clearly leaning hawkish. For all the data it will see and the analysis it will conduct between now and September, the decision will, to a large extent, come down to the trajectory of oil prices and conditions in the Middle East,” said Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics.
Brent crude futures hit USD100 a barrel on Thursday, for the first time since May after Yemen’s Houthis said they had attacked two Saudi oil tankers in the Red Sea, adding to concerns over global supply disruptions. The rise in crude prices lifted European energy shares up 1.54 percent.
Meanwhile, the food and beverage index fell 4.1 percent, weighed down by Nestle, whoseshares tumbled nearly 8 percent, marking their biggest loss since 1989.
The company raised its full-year organic sales outlookbut said it would sell part of its water and premium beverages business to Platinum Equity.
Tech stocks slipped 2.9 percent, led by STMicroelectronics , which fell 17.7 percent. after the chipmaker forecast third-quarter revenue slightly below market expectations. BE Semiconductor dropped 7.3 percent after its second-quarter results.
Offsetting some losses was a near-22 percent surge in Soitec after its quarterly revenue beat expectations.
Sentiment towards tech stocks has been mixed, as investors have punished US hyperscalers such as Alphabet for their rising AI spending, while beneficiaries of that spending are struggling with lofty valuations.
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