European Stocks Sink: DAX Leads Losses, FTSE 100 Follows on Rate and Growth Fears

Quick overview

A wave of central bank decisions swept across Europe on Thursday, with the SNB and BOE delivering expected outcomes. However, the market tone remained risk-off amid global uncertainty, geopolitical jitters, and anticipation of further policy signals.

Central Bank Decisions in Focus

In a widely expected move, the Bank of England (BOE) held its bank rate at 4.25%, underlining balanced risks to inflation and economic momentum. While inflation has eased, underlying price pressures remain a concern. Notably, three policymakers dissented, voting in favor of a 25 basis point rate cut, including Deputy Governor Dave Ramsden, joining known doves Swati Dhingra and Catherine Mann.

Meanwhile, the Swiss National Bank (SNB) cut its policy rate by 25 basis points to 0.00%, as it continues to combat falling inflation. The SNB also reinstated tiered interest on sight deposits in a move to better manage liquidity amid ongoing disinflationary pressures. Despite stronger growth signals earlier in the year, stagflation concerns have risen as Swiss inflation remained below target and economic momentum softened.

Broader Market Reaction and Selloff -DAX Faces the 50 SMA

With the US out for a public holiday, European markets had little external direction, amplifying the focus on domestic central banks. Traders took a defensive stance ahead of next week’s macro data and earnings updates. Germany’s DAX tumbled to 23,057.38, shedding 1.12%, led by declines in cyclical and industrial names.

UK FTSE 100 Index – Breaking Below the 20 Daily SMA

UK’s FTSE 100 slipped 0.58% to 8,791.80, with weakness in energy and financials offsetting gains in utilities. Broadly, sentiment remained subdued amid ongoing Middle East tensions, softening global demand indicators, and lingering concerns over high interest rates.

European Stock Market Close – Key Index Summary

• Germany’s DAX fell sharply, ending the day at 23,057.38, down 260.43 points (-1.12%), as investors grew more cautious ahead of central bank decisions and weaker global sentiment.
• UK’s FTSE 100 dipped to 8,791.80, losing 51.67 points (-0.58%), as energy and financials lagged despite strength in some defensive sectors.
• France’s CAC 40 suffered the steepest drop, closing at 7,553.45, down 102.67 points (-1.34%), driven by declines in luxury and tech stocks amid geopolitical tensions.
• Spain’s IBEX 35 retreated to 13,744.90, down 178.30 points (-1.28%), weighed by banking and industrial names after a disappointing batch of regional data.
• Italy’s FTSE MIB Total Return Index dropped to 38,942.19, down 476.42 points (-1.21%), as profit-taking and bond market jitters hit investor sentiment.

Conclusion: With the SNB turning more dovish and the BOE showing signs of internal division, markets remain stuck in limbo—unsure whether peak rates are behind us or if sticky inflation will force a longer pause. Barring a surprise from upcoming US or eurozone data, risk appetite may stay muted, especially as geopolitical tensions and summer illiquidity loom large.

German Index DAX 40

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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