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© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, October 26, 2022. REUTERS/Staff
By Sruthi Shankar and Anisha Sircar
(Reuters) -European shares fell on Thursday in cautious trading ahead of a widely expected interest rate hike from the European Central Bank, while Credit Suisse tumbled after unveiling restructuring plans.
The pan-European index slipped 0.5% after closing at a five-week high on Wednesday on expectations that major central banks will slow the pace of monetary policy tightening.
Credit Suisse fell 11.2% after the embattled lender said it planned to raise 4 billion Swiss francs ($4.05 billion), cut thousands of jobs and shift its focus towards its rich clients from investment banking, as it attempts to put years of scandals behind it.
Its shares hit a two-week low after slumping to record lows recently.
“The large Q3 net loss is a negative surprise and the capital raise is larger than we thought it would be,” analysts at Jefferies said in a note. “Given the significant uncertainty & execution risk we continue to see a better risk/reward elsewhere, esp. as peers are also trading at low multiples.”
All eyes are on the European Central Bank’s announcement, due at 1215 GMT, with policymakers widely expected to hike interest rates by 75 basis points to 0.75%. The bank is also likely to take the first steps in reducing its 8.8 trillion euro balance sheet, bloated by years of debt purchases and ultra cheap loans extended to banks.
“We had warnings from the IFO about a contraction in German growth in Q4, so a recession does look inevitable,” said Jane Foley, head of FX strategy at Rabobank, told the Reuters Global Markets Forum.
“Assuming that ECB hikes by 75 bps, it would be very hard to follow this up with a similar sized moved next time around. We expect the ECB to move to a 50 bps increment and then a 25 bps move early next year.”
Boosting UK’s , Shell (LON:) rose 3.7% after the energy major posted a third-quarter profit of $9.45 billion and announced plans to sharply boost its dividend by year-end. France’s TotalEnergies gained 1.3% after posting a sharp jump in its third-quarter net profit.
The duo helped lift Europe’s oil & gas sector by 1.7%.
However, technology stocks continued to remain under pressure as Franco-Italian chipmaker STMicroelectronics slumped 7.9% after it forecast sales growth to slow in the latter part of the year.
Miners also took a hit as Anglo American (LON:) fell 4.3% after a drop in production kept its third-quarter output broadly in line with last year.
($1 = 0.9873 Swiss francs)
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